Marketmind: Oil adds to Asian FX pressure By Reuters
Published Sep 18, 2023 05:47PM ET
Updated Sep 18, 2023 06:06PM ET
(C) Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo
By Jamie McGeever
(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.
The calm before the potential storm?
Ahead of a raft of central bank meetings this week, most notably the U.S. Federal Reserve’s latest decision, outlook and guidance on Wednesday, investors have started the week cautiously and key markets have been confined to tight trading ranges.
The dollar slipped 0.2% on Monday, U.S. Treasury yields moved no more than 3 basis points across the curve and remarkably, the three main indices on Wall Street ended the day no more than 0.07% away from Friday’s close.
The main exception appears to be oil, which continues to forge new peaks for the year in a steady march towards $100 a barrel. Brent crude is up 30% in the last three months, and has risen 10 out of the last 12 weeks.
In theory, this is not such a bad thing for Asian oil and energy producers like Indonesia, and should be a bigger headache for consumers, businesses and policymakers in countries like Japan and South Korea that import almost all their energy.
But on the surface at least, currencies of energy importing and exporting countries are feeling the heat.
Yen traders appear to have completely dismissed the potential for a hawkish policy shift from the Bank of Japan later this week and are pushing the yen to new lows for the year, while South Korea’s won has lost around 5% since July.
India’s rupee is again hovering around record lows against the dollar, China’s yuan is struggling to rebound much from the 16-year low struck earlier this month, and Indonesia’s rupiah has slid around 5% since May to a six-month low.
Of course, other factors are at play here, not least the broader strength of the U.S. dollar, fortified by surprisingly resilient U.S. economic data and a persistently wide yield advantage over its main rivals.
Asian currencies have generally performed poorly this year. Smelling blood and being highly attuned to the path of least resistance, currency traders may be sensing the energy price spike is another layer of vulnerability for Asian currencies to prey upon.
Could the oil price spike feature in the raft of central bank policy decisions and outlooks this week? In Asia, that would be the central bank meetings in Taiwan, the Philippines and Indonesia on Thursday, and Japan on Friday.
Tuesday’s Asian and Pacific economic calendar is pretty light, with the Reserve Bank of Australia’s last policy meeting minutes the main event. Malaysian trade data and balance of payments figures from the Philippines are also on tap.
Here are key developments that could provide more direction to markets on Tuesday:
– Reserve Bank of Australia meeting minutes
– Malaysia trade (August)
– The Philippines balance of payments (August)
(By Jamie McGeever; Editing by Deepa Babington)
Marketmind: Oil adds to Asian FX pressure
(C) 2007-2023 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.