fxs_header_sponsor_anchor

News

Oil surges, how will EMs react? - TDS

Mitul Kotecha - Senior Emerging Markets Strategist at TD Securities (TDS) - offered his take on the impact of rallying Oil prices on emerging market (EM) currencies. It is worth mentioning that Oil prices surged around 20% intraday on Monday in reaction to a drone strikes on the world's largest crude-processing facilities in Saudi Arabia, which knocked out more than 5% of global oil supply.

Key Quotes:

“While it is unclear how long the spike in oil prices will be sustained given slowing demand and strategic inventory releases, we examine historical periods (6 in total) of oil price increases (annualised gains of 200% since the start of 2015) to ascertain the potential impact on EM currencies.”
 
“EM FX in general benefits from higher oil prices. RUB, COP and MXN are the main beneficiaries while most Asian currencies, with the exceptions of SGD and to a lesser extent IDR, suffer as oil prices increase. INR loses most ground against the USD. Long Latam vs. Asia FX basket favoured as oil spikes.”
 
“Another imponderable is risk aversion. If risk appetite collapses due to fears of worsening middle east tensions in the wake of any retaliation to the drone attacks, some EM's could face a double whammy of pressures. In Asia, the most risk-sensitive currencies are INR, IDR and PHP.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.


RELATED CONTENT

Loading ...



Copyright © 2024 FOREXSTREET S.L., All rights reserved.