Ringgit, Indonesian rupiah drag Asia FX lower

04 Oct, 2024

BENGALURU: Asian emerging market currencies fell on Thursday, with Malaysian ringgit and Indonesia’s rupiah leading losses, after escalating tensions between Iran and Israel boosted safe-haven demand for the US dollar.

The ringgit fell for a third straight session, slipping as much as 1.2% to its lowest level since Sept. 19. The rupiah extended declines to a fourth consecutive session, falling 1% to a near three-week low.

Thailand’s baht fell 0.6% by 0651 GMT, after slipping as much as 1.1% earlier in the session to a two-week low.

The dollar index, which measures the currency against six major peers, added 0.2% to 101.86 - its highest since Sept. 3 - as of 0628 GMT. The index has gained in every session of the week so far.

Investor flight to the safe-haven dollar was driven by fears of a wider regional conflict following Iran’s ballistic missile strike on Israel. Meanwhile, stronger-than-expected US private payrolls data on Wednesday reinforced bets the Federal Reserve will not rush to cut interest rates, further aiding the greenback.

US nonfarm payrolls report on Friday will now be in focus, as it could provide cues on the Fed’s interest rate path.

The threat of a wider Middle East conflict pushed oil prices up more than 1%, raising concerns about increased costs for net-importing countries like Thailand and India.

“For THB (Thai baht) specifically I think downward pressures from rising oil prices could be lessened or mitigated by a rising gold price, which will lead to some profit-taking activities on gold and support THB,” said Poon Panichpibool, a markets strategist at Krung Thai Bank.

Malaysia, however, stands out as the only net oil and gas exporter among the major emerging Asian economies and could benefit from higher oil prices.

Investors are now awaiting inflation figures from the Philippines on Friday, as it could determine the pace of future rate cuts by the country’s central bank.

Elsewhere in Asia, China’s mainland markets remain closed for a week-long holiday, while Hong Kong’s Hang Seng lost 3.12%, having soared 6.2% a day earlier.

Japan’s Nikkei rose nearly 2% as the yen weakened after Prime Minister Shigeru Ishiba’s dovish comments.

Other equities inched lower, with those in Kuala Lumpur and Singapore down 0.2% and 0.1%, respectively, while shares in Jakarta fell 0.5%. Stocks in Manila pared earlier gains and were up 0.2%. Markets in South Korea were closed for a public holiday.

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