Oil Drags on Asian Currencies, Aussie Down on Rate Cut
Asian currencies slumped Tuesday as an overnight selloff in oil hit sentiment, while the Australian dollar dropped after the central bank slashed interest rates to a record low.
Lingering worries about a supply glut drove crude to below $40 a barrel in New York, a three-month low, dragging down oil-linked currencies like the Malaysian ringgit.
The Aussie dropped after the central bank cut its cash rate to 1.5 percent, a widely expected move to help the economy as it transitions away from a decade-long mining boom.
In Japan, the yen dipped against the dollar as investors waited for the government to spell out details of its 28-trillion yen ($273 billion) plan to boost sluggish growth.
The ringgit weakened 0.5 percent against the dollar, while other emerging market units, including the South Korean won, Indonesia's rupiah and the Philippine peso, were also down against the greenback.
The Aussie fell as low as 74.91 US cents, from around 75.40 cents just before the rate decision.
"The Reserve Bank have effectively thrown caution to the wind, respecting their mandate for price stability, amid diminishing negative effects from lower interest rates," said Chris Weston, an analyst for IG in Melbourne.
In Tokyo, the dollar bought 102.33 yen, down from 102.41 on Monday in New York. The euro was at $1.1179 and 114.40 yen, against $1.1160 and 114.29 yen.
Japan's finance minister pointed to "extremely nervous movements" in forex rates during a regular press briefing Tuesday, as officials fret over a sharp appreciation in the yen.
The safe-haven currency spiked during the turmoil after Britain voted to leave the European Union last month, hitting corporate profits just as Tokyo scrambles to light a fire under the economy.
The government offered few details about its new plan when Prime Minister Shinzo Abe unveiled it last week, before the Bank of Japan let down markets with only minor tweaks to its own measures on Friday.
The central bank did not expand a massive bond-buying program -- a cornerstone of its years-long battle against deflation -- despite hopes for a one-two punch to boost the sluggish economy.
"There's a growing sense that there's disappointment coming in the announcement this afternoon from the prime minister," said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific.
Source: Agence France Presse
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