Asian Currencies Fell on High Oil Costs | ForexGen

Monday, September 29, 2008

The Asian currencies fell this week as the oil prices surged and the rising inflation concerns forced foreign investors to cut the inflow of liquidity into this region.

Indian rupee and Malaysian ringgit led the seven out of the ten most traded Asian currencies (excluding the Japanese yen) that dropped after the Federal Reserve representatives stated that the high inflation becomes a real challenge as the oil prices rose to the new historical maximum.

Recent macroeconomic reports from the regional countries show that the GDP growth may start slowing down there, while the inflation risks grow on the food and energy costs.

Reduction of the money flow supplied by the foreign investors is seen as one of the primary reasons for the Asian currencies’ downfall. Regional central banks can’t rise the interest rates to fight inflation, because doing so will put the output growth at risk.

The Indian rupee fell 2.2 percent over this week — to 42.51 per one U.S. dollar. Rupee is the third-worst performing currency out of the most-traded Asian currencies this year with an 8.2 percent decline. The Malaysian ringgit declined for 1.4 percent this week, while the Singapore dollar dropped 0.2 percent during the last five days — to S$1.3713 for one U.S. dollar.

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