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Asian currencies gain after jitters over US-Iran

But the market is cautious, unsure how the confrontation between Washington and Tehran would play out

Bengaluru

MOST Asian currencies drew relief on Tuesday from the absence of any immediate escalation in tensions other than sabre-rattling between Iran and the United States after the killing of Tehran's top general in a US drone strike at the end of last week.

Fears of a fresh conflict in the oil-rich Middle East have kept markets on edge, but on Tuesday morning, even oil prices moderated, having hit their highest levels in months during the previous two sessions.

"Some oil importing countries' currencies, such as the South Korean won, can be seen with greater gains," said Pan Jingyi, market strategist at IG Asia.

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Otherwise, she said, the currency market was broadly cautious, unsure how the confrontation between Washington and Tehran would play out.

The South Korean won strengthened by as much as 0.7 per cent, making its biggest intraday percentage move in more than three weeks.

South Korea is the world's fifth largest importer of crude oil, but being a current-account surplus economy, it is relatively less impacted by crude price movements than other Asian oil importers, like India and Indonesia.

Data released earlier in the day showed South Korea's current account surplus widened from a year earlier to US$5.97 billion in November.

The Indian rupee and the Indonesian rupiah appreciated 0.3 per cent each.

Underpinning the risk-on sentiment, the Chinese yuan tacked on 0.4 per cent to strike a five-month high; the Malaysian ringgit and the Singapore dollar gained 0.2 per cent and about 0.1 per cent respectively.

The Taiwan dollar strengthened 0.2 per cent ahead of December trade data, scheduled to be released later in the day.

The Philippine peso put on up to 0.6 per cent, its biggest intraday percentage gain in more than two months.

Data released earlier in the day showed annual inflation picked up more than expected in December, but remained within the central bank's two to four per cent target for last year, on higher prices of food, non-alcoholic beverages and utilities.

ANZ analysts said in a note that if the recent rise in crude oil prices was sustained, it would pose further upside risk to inflation in the Philippines. However, they retained their view that the central bank has room to cut its policy interest rate as early as the first quarter this year. REUTERS