By - Feb 24, 2011 5:35 PM GMT+0800
Asian currencies weakened, led by India’s rupee and South Korea’s won, on concern the global economy will slow after oil prices surged on escalating tensions in the Middle East.
Crude climbed to the highest level since September 2008 as Libya’s uprising reduced shipments from Africa’s third-biggest producer. Global funds sold about $1 billion more shares than they bought in South Korea and Taiwan this week through yesterday, exchange data show.
“Rising oil prices may derail global economic growth and make people risk averse,” said Hideki Hayashi, a global economist at Mizuho Securities Co. in Tokyo. “Tensions in the Middle East raise concern about the impact on oil supplies.”
The rupee retreated 0.7 percent to 45.4275 per dollar as of 2:17 p.m. in Mumbai, according to data compiled by Bloomberg. The won dropped 0.6 percent to 1,131.05 and the Taiwan dollarweakened 0.6 percent to NT$29.76. The Philippine peso fell 0.6 percent to 43.805 and the Malaysian ringgit declined 0.5 percent to 3.0630.
Oil prices have surged 18 percent this week, and Deutsche Bank AG estimates a sustained increase of $10 a barrel would cut growth in the U.S. economy by 0.5 percent over two years.
Imported Inflation
India’s rupee weakened by the most since Jan. 5 on concern the rising oil prices would boost its import costs and widen the current-account deficit. Asia’s third-largest economy imports almost 75 percent of the fuel it uses. The currency also dropped on speculation stock market losses will prompt overseas investors to pull money out of local assets.
“The rupee is being dragged down by oil prices and the weakness in stocks,” said Krishnamurthy Harihar, treasurer at FirstRand Ltd. in Mumbai. “If oil persists at these levels, the current account is going to deteriorate.”
The peso pared its advance for the month to 1.2 percent on concern the increase in fuel prices will stoke inflation in a nation that imports almost all of its oil requirements.
The Philippine central bank is “carefully” monitoring the Middle East situation as it affects overseas workers’ remittances and oil prices, Assistant Governor Cyd Amador said today in Manila.
The won extended this week’s losses to 1.7 percent as the Bank of Korea said today consumer confidence declined for a third month in February. Overseas investors sold more Korean stocks than they bought for a third day.
The ringgit dropped for a fourth day as Malaysia’s benchmark stock index declined by the most in two weeks. Inflation in the Southeast Asian economy accelerated to 2.4 percent in January from 2.2 percent a month earlier, official data showed yesterday.
‘Passive Tax’
“If the price of oil keeps going up, it’s a passive tax on the consumer,” said Godwin Chan, a foreign-exchange trader at OSK Investment Bank Bhd. in Kuala Lumpur. “You wouldn’t have foreign or local investors buying in the local equities market.”
Elsewhere, Indonesia’s rupiah fell 0.3 percent to 8,883 and Thailand’s baht dropped 0.2 percent to 30.66, according to data compiled by Bloomberg. Singapore’s dollar declined 0.2 percent to S$1.2797, while China’s yuan weakened 0.07 percent to 6.5787.
To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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