Asia forex hit by oil slide, deflation worries

Emerging Asian currencies from Malaysia’s ringgit to South Korea’s won hit new lows on Monday, as data highlighted the economic toll wrought by plunging oil prices, sending the dollar broadly higher.

The ringgit underperformed regional peers, falling to around 5-year lows as investors worried that US crude’s slide to a five-year low will hurt growth in Malaysia, a net oil exporter and major palm oil producer.

South Korea’s won touched its weakest in more than 15 months after data showed an unexpected slide in November exports and as the yen fell to its lowest in more than seven years against the dollar.

Deflation woes

The sell-offs in the region’s currencies come as sliding oil prices continue to stir deflation fears in the euro zone and Japan.

“Falling oil price reflects partly growth concerns, which are Asian FX negative. The monetary stance is expected to shift to easing bias in the medium-term,’’ said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.

China’s manufacturing data

Earlier on Monday, China reported slower growth in its manufacturing sector in November, suggesting the world’s second-largest economy is still losing momentum.

China’s yuan eased to two-month lows after the central bank set another weaker midpoint. The Indonesian rupiah did not escape the grim mood, skidding to an 11-month low as October exports fell more than expected.

Commonwealth Bank’s Ji expects markets to increase the odds of a rate cut in Malaysia amid the deterioration in the trade sector, adding that in general the dollar is likely to remain firm this week.

Traders will also be focused on central bank meetings of the euro zone, England and Australia this week.

Ringitt plunges

The ringgit lost as much as 1.6 per cent to 3.4375 per dollar, its weakest since February 2010. The Malaysian currency came under pressure from dollar demand linked to daily-fixing, while the central bank was suspected of intervening to limit the unit’s depreciation, traders said.

Won drops

The won fell as much as 1.1 per cent to 1,120 per dollar, its weakest since August 23, 2013, after data showed exports in November unexpectedly tumbled their most in more than 1-1/2 years, increasing pressure for further rate cuts.

Rupiah falls

The rupiah slid 0.6 per cent to 12,270 per dollar, its weakest since January 7. The official Jakarta Interbank Spot Dollar Rate (JISDOR), which the central bank had launched last year in an effort to manage exchange rate fluctuations, was fixed at 12,264 rupiah per dollar, weaker than Wednesday’s 12,196.

Indonesia’s exports in October fell a worse-than-expected 2.21 per cent from a year earlier, while a survey showed manufacturing activity contracted in November to its weakest level since early 2011.