Asian currencies face limited upside against the U.S. dollar as the Federal Reserve’s shift toward tighter policy offsets local economic tailwinds. Strategists at OCBC Group Research note that lower-yielding currencies—such as the Thai baht and Korean won—are especially vulnerable to capital outflows toward higher-yielding U.S. Treasurys. While the Fed held rates steady, removing its previous easing bias signaled a clearer path toward rate hikes this year.

The Fed’s updated ‘dot plot’ now points to a median year-end rate of 3.75%, up from 3.4% in March, according to CBA’s Samara Hammoud. Roughly half of FOMC officials expect at least one hike by year-end, reinforcing dollar strength. Asian currencies like the Philippine peso and Indonesian rupiah, however, benefit from falling oil prices, which ease inflation and current-account pressures for import-dependent economies.

Despite early consolidation, the won dipped 0.2% to 1,524.14 per dollar, while the yen held steady at 160.60. The dynamic favors dollar strength in the near term, particularly for currencies with weaker fundamentals or higher sensitivity to U.S. monetary shifts.