Thai baht, Taiwan dollar, Korea won most at risk from oil price, Barclays says

[SINGAPORE] A surging oil price is likely to trigger a depreciation in Asian currencies, notably the Thai baht, Taiwan dollar and Korean won, according to Barclays.

The rise in oil price “implies risks for most Asian FX in the near term, especially if oil prices move even higher in the event of a potential escalation in the conflict,” analysts including Brian Tan wrote in a note to clients on Tuesday (Jun 17).

Hostilities between Israel and Iran have triggered a sharp rise in crude prices, with markets closely watching for signs that Teheran may seek to disrupt flows through the waterway through which about a fifth of the world’s daily output passes. Such a move would have significant ramifications for Asian economies that depend heavily on fuel imports.

While India’s rupee has weakened broadly in line with expectations, the poor performance of the Philippine peso is not likely due to oil as Barclays’ analysts find that currency is one of the least vulnerable to surges in the crude price.

Global benchmark Brent has rallied about 16 per cent so far this month. In fixed income markets, sovereign bonds from Singapore and South Korea would be among the most affected in the event of another 20 per cent spike in oil prices – though the impact would likely remain contained, Barclays said.

“We expect Asian rates markets to continue to ignore the current move up in oil prices, though this could change if oil prices undertake a more prolonged and sharper move higher,” the analysts wrote. BLOOMBERG