(May 5): Asian currencies tumbled on Tuesday, after escalating hostilities in the Middle East threatened to fuel inflationary pressures and hamper growth prospects in oil-importing emerging economies.
The US and Iran launched new attacks in the Gulf on Monday as they wrestled for control of the Strait of Hormuz, marking the most serious escalation since the ceasefire took effect in early April. That sent oil prices soaring more than 6%.
Benchmark Brent crude eased slightly on Tuesday in Asia, but was still above US$113 a barrel.
The Philippines’ annual inflation quickened to a three-year high in April at 7.2%, compared with a Reuters poll of economists’ 5.5% expectation.
Diesel prices for the month rose by 122.7% and gasoline accelerated by 60% to all-time highs based on available government data.
The Philippine peso dropped as much as 0.3% to trade at 61.726 a dollar, close to an all-time low of 61.728 hit in the last session. The currency has dropped about 7% since the conflict began in late February and has lost the most among Asian currencies since.
“Markets are paring back risk trades after the US and Iran exchanged fire in the Strait of Hormuz, amid the start of US efforts to guide ships through the strait,” said Chang Wei Liang, FX and credit strategist with DBS.
That “could add further pressures to Asian importers’ currencies, including INR (Indian rupee), IDR (rupiah) and THB (Thai baht).”
The Indonesian rupiah fell for a sixth straight session to a record low of 17,445 a dollar, breaching the 17,400 mark for the first time. It has lost about 4% since the war began.
The central bank attempted to reassure markets on Tuesday, saying it will take “consistent and measured steps” to safeguard the rupiah.
The Thai baht weakened to as much as 32.84 per dollar, down 5.7% since the start of the conflict.
The Malaysian ringgit fell 0.3% to 3.9620 per dollar. The currency, however, is still up 1.9% since the conflict began and has outperformed its peers, underpinned by Malaysia’s financial and political stability.
Meanwhile, Taiwan stocks reversed course to end 0.2% higher at a record. The TSMC-led benchmark continues its chip-driven ascent and is up 40.8% this year so far.
South Korean and Chinese markets were closed for a public holiday.
Jakarta stocks added 0.8%. The benchmark is down 18.6% this year, unsettled by Indonesia’s fiscal and governance health.
Data showed Indonesia’s economy grew 5.61% in the January-March quarter from a year earlier, its fastest pace in more than three years.
Uploaded by Magessan Varatharaja
