Opec deal hurts Asia FX

Most emerging Asian currencies eased on Thursday as an Opec deal to reduce oil production pushed up the dollar and US Treasury yields, adding to views that the world's largest economy will see higher inflation. China's yuan eased, but stronger-than expected manufacturing activity in November helped the renminbi recover some losses. Sources told Reuters that China's central bank was imposing new rules on yuan-denominated lending overseas in authorities' latest attempt to stem capital outflows.
The South Korean won hit a near one-week low on the greenback's strength. Indonesia's rupiah touched its weakest in almost six months on equity outflows. Malaysia's ringgit eased to 4.660 per dollar, its lowest since September 29, 2015, when it touched a 17-year trough. The Organization of the Petroleum Exporting Countries on Wednesday agreed to its first output cut since 2008, with Saudi Arabia accepting "a big hit" on its production. Non-Opec Russia will also join output reductions for the first time in 15 years to help Opec prop up oil prices.
Crude prices surged after the agreement with US oil up more than 9 percent to a one-month peak just shy of $50 per barrel. That added to expectations of rising inflation in the United States, which were already high on prospects that president-elect Donald Trump will seek reflationary policies backed by more fiscal spending. As a result, Treasury yields spiked and the dollar hovered around a 13-1/2-year peak against a basket of six major currencies hit last week.
"The Opec deal supports the reflation theme we are looking at," said Christopher Wong, a senior FX strategist for Maybank in Singapore. "The USD still has room to run higher. In EM Asia FX space, the Singapore dollar and the won are seen more vulnerable given soft growth and inflation outlook."
South Korea's annual inflation in November remained at an eight-month high, but still lagged expectations in a bad sign for an economy facing considerable uncertainty at home and abroad. The won earlier skidded as much as 0.7 percent to 1,177.8, its weakest since November 25. The South Korean currency recovered much of earlier losses as data showed exports in November rose for the first time since August and at the fastest pace in nearly two years.
Local exporters bought the currency for settlements, limiting the currency's downside, traders said. The rupiah fell 0.3 percent to 13,585 per dollar, its weakest since June 3. Foreign investors were net sellers in the Indonesian stock market over the previous 16 consecutive sessions, dumping a combined net 11.4 trillion rupiah ($840.7 million) during the period. Indonesia's central bank was suspected of intervening to curb the rupiah's weakness, traders said.