Energy Importers' Currencies Slide as Iran War Drives Oil Shock Through FX Markets
Updated
Updated · The Japan Times · May 18
Energy Importers' Currencies Slide as Iran War Drives Oil Shock Through FX Markets
5 articles · Updated · The Japan Times · May 18
The weakest currencies since the U.S.-Israeli war with Iran began have been mostly oil importers, including the Egyptian pound, Philippine peso, South Korean won and Thai baht.
The split tracks the Strait of Hormuz closure: importers face soaring oil and gas bills, while exporters such as Brazil, Kazakhstan and Nigeria have seen their currencies rise.
Governments in importing countries have tried to cushion consumers by cutting fuel taxes and lifting subsidies, but that has drained fiscal and external buffers rather than stopping the pressure.
Foreign-exchange reserves are now falling as energy import costs climb without a matching boost to export earnings, turning an energy shock into a broader currency crisis.
That pattern also helps explain why commodity-exporter currencies have recently outperformed in emerging markets, supporting a rebound in carry trades tied to higher crude prices.
With Brazil's currency weakening, which overlooked emerging markets now offer the most lucrative returns?
Is Japan's interest rate hike the trigger that could crush the multi-trillion dollar carry trade?
Is the carry trade's revival a golden opportunity or a fragile bubble about to burst?