Investors in Asian markets are proceeding with caution as they await a series of central bank meetings throughout the week. The most anticipated of these meetings is the U.S. Federal Reserve’s decision, outlook, and guidance on Wednesday. As a result, key markets in the region have experienced limited trading ranges so far this week.
While most markets have remained relatively stable, oil continues to climb to new highs for the year, inching closer to $100 a barrel. This rise in oil prices has both positive and negative implications for Asian economies. Energy-producing countries like Indonesia stand to benefit, while energy-consuming countries like Japan and South Korea may face challenges. However, the impact of rising oil prices is being felt across the board.
Many Asian currencies are feeling the pressure as a result. The Japanese yen has reached new lows for the year, despite the potential for a hawkish policy shift from the Bank of Japan. South Korea’s won has lost approximately 5% of its value since July. Additionally, India’s rupee is hovering near record lows against the dollar, China’s yuan is struggling to rebound from a 16-year low, and Indonesia’s rupiah has hit a six-month low.
The strength of the U.S. dollar, supported by resilient economic data and a wide yield advantage over its rivals, has also contributed to the weakness of Asian currencies. Currency traders may view the spike in oil prices as an additional vulnerability for these currencies to exploit.
As investors await more direction from central bank decisions and outlooks, scheduled meetings in Taiwan, the Philippines, Indonesia, and Japan later this week could potentially address the impact of the oil price spike.
In terms of economic events on Tuesday, the main focus will be on the Reserve Bank of Australia’s meeting minutes. There will also be data releases from Malaysia, including trade figures for August, and the Philippines, including balance of payments data for the same period.
Source: Jamie McGeever, Reuters