Asia FX: Oil rebound keeps importers vulnerable – OCBC
OCBC’s Sim Moh Siong and Christopher Wong report that Philippine Peso (PHP), Indian Rupee (INR), Indonesian Rupiah (IDR) and Thai Baht (THB) weakened as Oil’s rebound renewed pressure on net importers.
Philippine Peso, Indian Rupee, Indonesian Rupiah, and Thai Baht weakened as oil prices rebounded, placing net importers in a vulnerable position. Sim Moh Siong and Christopher Wong of OCBC explain that while relief from lower oil prices is temporary, renewed strength can worsen terms of trade, increase imported inflation, and strain external balances, leaving Asian currencies exposed even with a more supportive US Dollar backdrop.
The Philippine Peso led the declines, with the Indian Rupee, Indonesian Rupiah, and Thai Baht following suit. Crude oil prices have rebounded sharply over the past two days, raising concerns due to Iran's conditions for an agreement and uncertainty over the deal's timing. For net oil importers like India, Indonesia, the Philippines, and Thailand, higher oil prices can further worsen their situation by negatively impacting the terms of trade, adding to imported inflation, and putting pressure on their external balances.
Recent positioning had improved as cheaper oil alleviated some concerns, but with oil prices rebounding, Asian currencies may remain exposed. The article advises that the focus should remain on the US CPI for its implications on Fed expectations, US yields, and the USD, as US inflation data release and developments in the Middle East crisis are closely watched by investors.
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