Bloomberg News

Asian Currencies Drop as Rise in Oil Stokes Inflation Concerns

February 27, 2012

The Philippine peso and Indonesia’s rupiah led a decline among Asian currencies on speculation a three-week rally in oil prices will stoke inflation and derail regional efforts to spur economic growth.

The Bloomberg-JPMorgan Asia Dollar Index (ADXY), which tracks the region’s 10 most-traded currencies excluding the yen, headed for the steepest drop since Feb. 14 as Asian stocks fell. Crude oil traded at $108.98 a barrel in New York, capping an 11 percent jump this month, as the World Bank and International Monetary Fund said higher fuel costs are a risk to the global economy.

“High oil prices are a worry for most currencies,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “It’s the worry of oil prices weighing on growth.”

The rupiah weakened 0.6 percent to 9,172 per dollar as of 3:15 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The peso dropped 0.4 percent to 42.978, Malaysia’s ringgit slipped 0.3 percent to 3.0218 and South Korea’s won fell 0.3 percent to 1,129.24.

Oil for April delivery traded near a nine-month high as the Group of 20 met in Mexico City over the weekend to prevent the European debt crisis from escalating. G-20 nations rebuffed German-led calls yesterday for more aid, saying any support from outside Europe depends on the euro area delivering more financial firepower within two months.

The world’s economy is “still not out of the danger zone” amid higher oil prices, IMF Managing Director Christine Lagarde said in a statement after the meeting. Europe’s stability and energy prices are two big risks to growth, World Bank President Robert Zoellick said in Singapore on Feb. 25.

China Inflation

The won extended a run of three weekly declines after Finance Minister Bahk Jae Wan said in Mexico City that instability in the oil market threatens to push inflation above the government’s 3.2 percent target for the year. South Korea is the world’s fifth-largest oil importer.

“There’s dollar demand from refiners who are paying for their oil imports,” said Kim Sung Soon, a chief currency dealer at Industrial Bank of Korea in Seoul.

China’s yuan fell 0.06 percent to 6.3013 per dollar in Shanghai on concern slowing global growth will prompt policy makers to limit currency gains to protect exporters. The People’s Bank of China weakened its currency’s reference rate by 0.03 percent to 6.2985 today.

“Chinese officials are torn between protecting growth and curbing inflation, so the yuan fixing has been kept steady at around 6.3,” said Edmond Law, the Hong Kong-based deputy head of foreign exchange at BWC Capital Markets. “I don’t see any major changes in policies” before the National People’s Congress meets on March 5, he said.

Elsewhere, Thailand’s baht fell 0.4 percent to 30.49 per dollar, the biggest decline in three weeks. India’s rupee slipped 0.2 percent to 49.0481 and Singapore’s currency dropped 0.4 percent to S$1.2606. Financial markets in Taiwan are closed for a holiday.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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