BANGKOK, April 3 (Reuters): Most Asian currencies were on the back foot on Monday, with the South Korean won and Thai baht suffering the most losses, as a jump in crude prices globally put the narrative back on higher inflation, stoked by OPEC+'s output cut announcement.
The South Korean won depreciated as much as 1.5%, to see its worst day in almost a month, while the Thai baht also slumped about 1.2%. The won is currently the weakest currency in emerging Asia, having lost nearly 4% on a year-to-date basis.
Christopher Wong, a currency strategist from OCBC said the surge in oil prices could potentially pose more downward pressure to sentiment-proxy, net importer Asian currencies, including the South Korean won and the Thai baht, in the near term.
Brent oil futures rallied after OPEC+ late on Sunday announced further oil production cuts of around 1.16 million barrels per day. That overshadowed market optimism of a softer reading of core inflation from the U.S. on Friday.
A jump in oil prices usually results in a selloff in riskier assets since it becomes more expensive for net oil importers to buy crude, pushing up price pressures in countries with a large dependence on oil.
"The OPEC+ cut reflected the organisation’s bearish view on crude oil demand after the banking turmoil and could pressure the Fed to extend its rate hike cycle to anchor inflation expectation," said Ken Cheung Kin Tai, Chief Asian FX Strategist from Mizuho Bank.
The Malaysian ringgit, Philippines peso and the Singapore dollar fell between 0.2% and 0.5% Separately, the safe-haven dollar received a boost as market players adjusted their expectations for the possibility of further rate hikes.
The dollar index, which measures the strength of the greenback against six major currencies was at 103.00 by 0625 GMT.
Weaker factory activity data from Asia added to the woes in Asian markets as soft overseas demand hurt output, pointing to a deteriorating global economic outlook.
Inflation in Indonesia cooled to its lowest in seven months in March, as prices rose slower than usual. However, equities in Asia traded positively, with stocks in Singapore and Malaysia gaining about 0.6% and 0.3%.
Other indices in Indonesia and the Philippines rose more than 0.2% each, though shares in Bangkok and Seoul shed 0.7% and 0.3%. Markets in Taiwan were closed for a public holiday. - Reuters
