Most Asian currencies weakened against the dollar on Monday, with net oil-importers taking a sharp hit after an attack on Saudi Arabia’s oil facilities drove up crude prices and worsened tensions between the United States and Iran.
Oil prices soared with Brent crude posting its biggest intra-day percentage gain since the Gulf War in 1991, after an attack on Saudi Aramco’s crude processing sites on Saturday shut about 5 percent of global supply.
“Emerging Asian currencies most at risk to higher oil prices belong to countries with the largest oil trade deficits. They are the South Korean won, the Thai baht and the Indian rupee,” a DBS note said.
The Indian rupee was the worst hit by the surge in oil prices, weakening 0.9 percent, while the Indonesian rupiah shed 0.6 percent, its biggest intraday percentage drop since Aug 6.
Also adding to pressure, Indonesia’s exports fell 9.99 percent in August, sharper that a Reuters poll prediction of a 6 percent fall.
The Philippine peso weakened 0.5 percent against the dollar, while the Thai baht edged lower.
Meanwhile, US President Donald Trump’s comments that the United States was “locked and loaded” for a potential response to the attack spiked US-Iran tensions and further strained risk appetite.
Investors now await the US Federal Reserve rate decision expected later this week with the market expecting a rate cut for the second meeting in a row.
Malaysian financial markets were closed for a holiday.
The Taiwan dollar and the South Korean won firmed 0.4 percent and 0.6 percent, respectively, catching up on an Asian currency rally on Friday, when both markets were closed.
“Taiwan and Korea were both closed so they are both on a catch-up mode as far as the risk-on sentiment is concerned,” Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken said.
However, she added the spike in risk aversion from the Aramco attack would now limit that upside for both currencies. – Reuters