Asian currencies stay under pressure as Middle East risk lingers
Traders point to Trump's rejection of Iran's latest Strait of Hormuz proposal as the latest flashpoint for a region already contending with a firmer dollar and volatile oil.
Published
Asian currencies remained weak on Monday, with traders citing ongoing geopolitical tensions in the Middle East as the main driver, the Wall Street Journal reported.
FXStreet reported that President Trump had rejected Iran's latest proposal on the Strait of Hormuz, a move cited as fresh uncertainty for the region during Monday's Asian trading hours. The outlet also reported that the dollar weakened against the pound even as traders raised bets on an October Federal Reserve rate rise.
MUFG Research said in a note dated Monday that Middle East tensions remain elevated, with no clear resolution in sight for disruption around the Strait of Hormuz and no clarity on when oil supply might normalise. The bank said the premium of spot crude over front-month Brent has widened to around $18 a barrel, up from a negative spread at the start of September, though still short of the roughly $35 a barrel reached in April. MUFG added that elevated oil prices and high global yields remain a difficult backdrop for currencies across Asia.
The pressure is not new. Around September 19, the South Korean won, the Indonesian rupiah, the Indian rupee and the Philippine peso had each repeatedly hit fresh periodic lows, with some at multi-year troughs, according to LatLongInfo, which pointed to a stronger dollar, volatile oil and geopolitical risk as the drivers. The site reported that the rupee had lost more than 5% of its value since the second quarter, the rupiah around 6% since early September, and the peso 6.4% since late February.
Currency weakness of this kind, tied to aversion to risk rather than to a change in the region's economic fundamentals, tends to support the dollar and other safe havens rather than mark a new bearish turn for Asian assets. For now the moves look like a continuation of an existing risk-off mood rather than a fresh catalyst against the region.