BENGALURU: The Philippine peso hit a record low on Thursday as most Asian currencies and stocks fell, with escalating conflict in the Middle East weighing on risk sentiment and lifting oil prices.
Markets remained firmly in risk-off mode after Iran attacked energy facilities across the Middle East after Israel struck its South Pars gas field, marking a major escalation in the war. Oil prices last read above USD114 a barrel.
Many Asian economies are net energy importers, leaving emerging Asian markets vulnerable to prolonged energy price spikes.
The Philippine peso breached the key psychological 60-per-dollar level and touched a record low of 60.306 in the session. “Higher oil prices are going to deliver a trade shock for the Philippines and are going to weigh on the current account,” said MUFG senior currency analyst Lloyd Chan, adding that Thailand, India, South Korea and the Philippines were particularly susceptible to energy spikes.
“In that regard, we have heard policy signals from the Bangko Sentral ng Pilipinas that they may consider raising rates (in April), and I think that’s the appropriate response, given the inflation risk.” Elsewhere in the region, Malaysia’s ringgit fell to 3.940 and Thailand’s baht was at a roughly five-month low of 32.86 against the dollar.
The South Korean won slipped past the key psychological 1,500-level, last quoted at 1,501.40 against the greenback.
Among emerging Asian equities, tech-heavy South Korean stocks closed down 2.7 percent, paring some losses from earlier in the session, while Taiwan’s benchmark index closed down 1.9 percent.
“If high energy prices persist for long, the second-round effect is likely to ultimately affect AI-driven tech demand,” analysts at HSBC wrote.
However, Chan noted that it was more of a near-term volatility and potential spillover effect of oil prices on the region’s current account and inflation.
In Southeast Asia, Thai shares fell around 1.1 percent. The country’s deputy central bank governor said in a March 16 speech published on Thursday that growth could slow by as much as 0.7 percent if the Middle East conflict extends into the second half of the year, adding that the recent rate cut to 1 percent is “appropriately accommodative”. Meanwhile, Anutin Charnvirakul was re-elected prime minister on Thursday after comfortably winning a parliamentary vote, securing a fresh mandate that could bring rare political stability.
Markets in Indonesia are closed for local holidays until March 24. Investors globally also parsed the US Federal Reserve’s comments on the risk of higher inflation after the central bank kept interest rates unchanged, as expected, while a few other G10 central bank meetings are expected later in the week.