Asia amasses US$8 trillion ‘currency-war chest’ as major economies brace for renewed depreciation pressure

Asian central banks have built up an enormous “currency-war chest,” with the region’s 11 largest monetary authorities now holding nearly US$8 trillion in foreign-exchange reserves — a crucial buffer as global market volatility and a resurgent US dollar re-ignite depreciation pressure across Asia.

In the first nine months of this year alone, Asian reserves swelled by more than US$400 billion, supported by earlier dollar weakness and surging gold prices.

China remains the dominant force, adding US$141 billion in reserves, followed by Japan with US$116 billion. A softer dollar boosted the value of non-dollar assets, while the jump in gold prices significantly lifted reserve valuations.

Analysts say Asia has more than enough ammunition to contain disorderly foreign-exchange swings, with reserve-to-import ratios still comfortably high across most economies. But sharp declines in global equities and the dollar’s rebound since September have put fresh pressure on Asian currencies.

India, Philippines, South Korea under heavy strain

The Indian rupee and Philippine peso have both hit historic lows in recent months, while the South Korean won is hovering near a 16-year low — forcing several Asian authorities to step up intervention.

India’s central bank has intervened both onshore and offshore to prevent the rupee from sliding past its previous record low of 88.80 against the dollar. The currency has come under pressure from Washington’s decision to impose up to 50% tariffs on Indian imports and from persistent foreign outflows from Indian equities.

South Korea is facing similar challenges. With the won down 3.2% last month, officials have coordinated with major institutional players — including the National Pension Service — to stabilise the market.

Japan, meanwhile, continues to rely on verbal intervention, as Finance Minister Satsuki Katayama escalates warnings after the yen touched a 10-month low.

Risk of a clash with Washington

A more aggressive defence of Asian currencies could push the region closer to conflict with US President Donald Trump, who links currency intervention to grounds for raising tariffs. 

Although the latest US Treasury report stopped short of labelling any country a “currency manipulator,” it criticised China for a lack of transparency and placed several Asian economies — including China, Japan, South Korea, Singapore and Vietnam — on its close-monitoring list.

More tools beyond reserves

In addition to massive reserve buffers, Asian governments have a variety of supporting tools — from Japan’s public warnings, to Malaysia’s push for repatriation of export earnings — all aimed at easing pressure without provoking accusations of currency manipulation.

The challenge ahead for Asia is navigating the fine balance between defending currency stability and avoiding a political showdown with Washington, as global volatility intensifies and the dollar regains strength.