Most Asian currencies drew relief on Tuesday from the absence of any immediate escalation in tensions other than rattling between Iran and the United States after the killing of Tehran’s top general in a US drone strike at the end of last week.
Fears of a fresh conflict in the oil-rich Middle East have kept markets on edge, but on Tuesday morning even oil prices moderated, having hit their highest levels in months during the previous two sessions.
“Some of oil importing countries’ currencies, such as the South Korean won, can be seen with greater gains,” Jingyi Pan, market strategist at IG Asia, said.
Otherwise, Pan said the currency market was broadly cautious, unsure how the confrontation between Washington and Tehran would play out.
The South Korean won strengthened as much as 0.7 percent, making its biggest intraday percentage move in more than three weeks.
South Korea is the world’s fifth largest importer of crude oil but being a current account surplus economy, it is relatively less impacted by crude price movements compared to other Asian oil importers, like India and Indonesia.
Data released earlier in the day showed South Korea’s current account surplus widened from a year earlier to $5.97 billion in November.
The Indian rupee and the Indonesian rupiah appreciated 0.3 percent each.
Underpinning the risk-on sentiment, the Chinese yuan tacked on 0.4 percent to strike a five-month high, while the Malaysian ringgit and the Singapore dollar gained 0.2 percent and about 0.1 percent, respectively.
The Taiwan dollar strengthened 0.2 percent ahead of December trade data, scheduled to be released later in the day.
The Philippine peso put on up to 0.6 percent, its biggest intraday percentage gain in more than two months.
Data released earlier in the day showed annual inflation rose picked up more than expected in December, but remained within the central bank’s 2 percent-4 percent target for last year, on higher prices of food, non-alcoholic beverages and utilities.
ANZ analysts said in a note that if the recent rise in crude oil prices was sustained, it would pose further upside risk to inflation in Philippines, while retaining their view that the central bank has room to cut its policy interest rate as early as the first quarter this year. – Reuters