BENGALURU: Most Asian emerging market currencies edged lower on Tuesday as the conflict in the Middle East and high oil prices dampened risk appetite, and as US Federal Reserve officials suggested a softer outlook for interest rates.
The Indonesian rupiah depreciated 0.1% while the South Korea won retreated 0.2%. The Malaysian ringgit edged 0.1% lower.
Market participants are wary that the conflict in the Middle East, which has pushed up oil prices, could create additional inflationary pressures for Asian emerging market countries which are net oil importers.
Oil prices were lingering around the high level touched in the previous session.
Markets are focused on whether the conflict will broaden and lead to a more sustained rise in crude prices, analysts at Maybank wrote in a note.
“Recent headline Consumer Price Index readings in Asia have surprised to the upside due to higher energy and food prices. A further spike in oil prices will only complicate matters for the region’s central banks,” analysts at ANZ wrote in a note.
“Further portfolio outflows from the region look likely in the near term as a result.”
Meanwhile, comments from two US Federal Reserve officials on Monday signalled a slight dovish shift on the outlook for interest rates, providing some relief to Asian currencies as the dollar slipped and US Treasury yields eased.
Back in Asia, the Thai baht advanced 0.2% and the Chinese yuan edged 0.1% higher.
Equities in the region advanced with shares in Malaysia jumping 1% to their highest level since Sept. 29. Shares in Singapore rose 0.7% heading for their best day since Sept. 15.
Equities in Bangkok, Indonesia, Seoul and Manila jumped between 0.4% and 0.8% respectively.
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