Global trade tensions hit Asian currencies

Indian rupee extends losses for second session on Iran sanctions, oil supply

Amid global trade tensions, most Asian currencies tumbled on Tuesday on the back of a strong US dollar rally, with the Chinese yuan diving past 6.7 per dollar for the first time in nearly a year.

The Indian rupee, which was regarded by Reuters as Asia’s worst performing currency, extended losses for the second session. It weakened by 16 paise at 68.96 against the US dollar in the morning trade.

The currency ended at a near five-year low of 68.80 against the greenback on Monday, after tumbling below the 69 level for the first time ever last week.

The trend is increasing for Asian currencies to fluctuate along with the yuan, but the depreciation of the yuan is not the main reason for other Asian currencies’ weakness, said Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, told the Global Times on Tuesday.

“The protectionism and trade war the US has launched against other major economies has been an important factor,” said Zhou, adding that most Asian countries are exportoriented economies with the US being their major exporting market.

The depreciation of many Asian currencies is mainly due to a rising US dollar, which may trigger a capital outflow from Asia to the US, he said.

The Indian rupee has been Asia’s worst performing currency this year, shedding more than 7 percent so far this year, according to Reuters.

As for major Asian oil importers like India and China, the depreciation of their currencies is also related to the recent oil price hike, said Zhou.

The volatility of the rupee is being driven by global factors, including proposed US sanctions on Iran and the mismatch in demand and supply of oil, Subhash Chandra Garg, economic affairs secretary at the finance ministry, was quoted as saying in a New Delhi Television report on June 29.

A Reuters poll showed that investors raised their short positions slightly in the rupee, although India’s central bank raised interest rates in June for the first time in four years.

The Philippine peso is the second worst in the region, weakening 6.6 percent against the US dollar so far this year.