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Asia FX sinks, dollar rises as oil rally pushes up inflation fears

Most Asian currencies fell on Monday, while the dollar firmed as a rally in oil markets, following a surprise OPEC+ production cut, brewed concerns that inflation could remain buoyed by high fuel prices.

A raft of weak Asian economic data also weighed, as a post-COVID rebound in China appeared to be running out of steam. The lost 0.3% after a private survey showed that the country’s barely expanded in March amid weakening output and demand.

Softening growth in China bodes poorly for broader Asian markets, given their dependence on the country as a trading hub.

On the other hand, the dollar firmed sharply against a basket of currencies, with the and up 0.5% each. The jump corresponded with a , which came after the Organization of Petroleum Exporting Countries and allies unexpectedly cut production by over 1 million barrels per day.

The move points to higher fuel costs across the globe, which in turn could feed into inflation in the coming months. This notion saw markets begin pricing in a by the Federal Reserve, according to Fed Funds futures prices.

Markets largely looked past data on Friday which showed that eased slightly more than expected in February. Focus this week is squarely on data for March, due Friday, for more cues on monetary policy.

Other Asian currencies retreated, with the down 0.5% as data that the country’s remained in contraction through March. among the country’s largest producers also read smaller than expected in the first quarter of 2023.

The led losses across Southeast Asia with a 0.7% drop, while the lost 0.3%, and was likely set for more weakness due to pressure from high oil prices.

Still, losses in the rupee were limited ahead of a meeting on Thursday, with the bank signaling that it is likely to raise interest rates further.

The fell 0.3%, also coming under pressure from growing bets that the will pause its rate hike cycle when it meets on Tuesday.

The was the worst performer in Asia for the day, down 0.8%, while the lost 0.4%.

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