EM Asia FX feeling the pressure from falling oil prices

Falling oil prices have  dampened local market sentiment, and despite falling US yields overnight the USD remained solid outside of JPY motioning a market shift to risk aversion

 

When oil prices decline they have a negative pass through to regional currencies and with the greenback carving  out gains against the broader G-10 landscape, local currencies should fall out of favour near-term

 

The MSCI inclusion of A-shares should provide a longer term boost to local markets, and the incision is structured such that there’s a huge incentive for China to keep reforms on track so that the participation weights will broaden as more reforms get introduced. Long term this should provide capital inflow to the mainland and reduce pressure on the RMB complex. Reports t of sporadic currency interventions at yesterday’s close on the CNY has helped Yuan sentiment, but strong dollar narrative continues to carry the day.

 

North Korea headlines are creating a risk ripple after  South Korea’s military said  a drone found earlier this month on a mountain near the Demilitarized Zone border was confirmed to have been from North Korea and described it as a “grave provocation.” Also, the fallout from the Warmbier tragedy is more likely to gather pace as President Trump pulled few punches on his condemnation of North Korea.

 

The Ringgit continues to tarnish on the weaker oil price narrative and the hawkish Fed storyline.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes