The Indonesian rupiah and Malaysian ringgit lost the most against the US dollar on Monday as some of Asian markets traded for the first time in the new year, reacting to falling oil prices, a weakening euro and a broad aversion to risky trades. The euro fell to a nine-year low against the dollar, pushed down by rising speculation among market participants that the European Central Bank will soon adopt quantitative monetary easing, possibly as early as at a January policy review.
A further fall in oil prices added to the selling pressure on the euro, while also propping up the dollar against commodity exporter currencies such as the Aussie dollar. US crude and Brent futures dropped to fresh 5-1/2-year lows on Monday as worries about a surplus of global supplies amid weak demand continued to drag on oil markets. The rupiah lost more than a percent, succumbing not just to the broad dollar rally but also to inflation data showing the cut in fuel subsidies late last year, while positive for the country's budget, was having an impact on consumer prices.
Markets in China, Taiwan and a few other centres opened for the first time in 2015 on Monday, forcing those currencies to catch up with the US dollar's rally in last week's trades. "In Asia, US dollar strength is not being questioned, but that still leaves scope to differentiate," Vishnu Varathan, a strategist with Mizuho Bank, said in a note.
"Sustained oil price weakness suggests that the ringgit may be at the bottom of the stack while rupee and baht could gain given oil import reliance." The ringgit, Asia's weakest currency in 2014, was down 0.7 percent on Monday. The won fell 0.3 percent, moving alongside a drop in South Korean shares to a 2-1/2 week intraday low, in line with some of the regional stock markets as signs of slowing global factory activity crimped risk appetite.
The Korea Composite Stock Price Index (KOSPI) fell to its lowest level since December 18 in intra-day trade. The risk aversion prompted heavy foreign selling as offshore investors sold a net 100.5 billion won ($90.69 million) worth of shares on the main bourse. China's yuan edged down against the dollar after the central bank set the weakest official midpoint in nearly a month to reflect strength in the global dollar index. The People's Bank of China (PBOC) fixed the midpoint at 6.1248 per dollar, down 0.09 percent from the previous trading day on December 31. It was the weakest level since December 8.
Spot yuan changed hands at 6.2204 near midday, down 0.26 percent from last Wednesday's close at 6.2040. The Chinese currency lost 2.4 percent in 2014, its first significant annual loss since its landmark revaluation in 2005. China's foreign exchange market was closed January 1-2 for the New Year holiday and resumed trading on January 5. The spot rate is currently allowed to trade 2 percent above or below the midpoint.
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