Emerging market currencies jump

TOKYO: Emerging market currencies got a boost yesterday after a surge in oil prices eased fears about slumping demand and a weak global economy.

The gains tracked rallies across equities markets as investors went into the Christmas break with some festive cheer, helping to erase some hefty rent losses as the euphoria of the Federal Reserve’s interest rate hike last week wanes.

The US Department of Energy said stockpiles tumbled in the week ending Dec 18, while imports fell about 13% week on week.

The news led to hopes that a sell-off in the commodity – fuelled by a supply glut and weak global demand that has seen the Brent contract plumb to 11-year lows – may be nearing an end.

In response, oil producer Malaysia’s ringgit bounced 0.5% against the dollar, while the Indonesian rupiah added 0.2%, South Korea’s won gained 0.3% and the Taiwan dollar edged up 0.2%.

The dollar also struggled against its major peers, weakening to ¥120.69 from ¥120.87 on Wednesday in New York. The euro rose to US$1.0928 from US$1.0910, and was at ¥131.90 from ¥131.87 in New York.

“The rally in oil and commodity prices has significantly bolstered sentiment on emerging-market equities,” Isara Ordeedolchest, an investment strategist at SCB Securities, told Bloomberg News.

“This is a positive development ahead of the coming holidays after those markets were hard hit by fund outflows and weak commodity prices.”

Higher-yielding – and riskier – emerging units have been hit hard this year on fears of a flight of capital to the US as dealers look for better, safer investments boosted by the Fed rate raise.

In London yesterday, oil edged further above US$37 (RM159.50) a barrel but remained within sight of an 11-year low reached this week.

Brent was up 13 cents at US$37.49 a barrel as of 1307 GMT. It fell to US$35.98, an 11-year low, on Tuesday. US crude was up 20 cents at US$37.70 after gaining more than 8% this week.

US crude has gained support from falling inventories, reduced drilling and the lifting of a ban on most US crude exports, which has pushed West Texas Intermediate to a premium to global benchmark Brent for the first time in about a year. – AFP, Reuters