Home / Economy / Asian currencies weakening but not due to macro stress: Report

NEW DELHI: Asian currencies, including the Indian rupee, are depreciating amid a stronger dollar environment but not because of any existing imbalances related to Asia’s macro situation, Morgan Stanley said in a report.

The Indian rupee has turned out to be the worst performing emerging market currency, falling to a record low of 81.76 to a dollar amid sharp capital outflow from the country.

“While there has been a deterioration in macro stability indicators so far this year, we attribute this to the sharp rise in commodity prices earlier in the year, but these effects are expected to reverse soon.

“Unlike in 1997-98 or in 2013, Asia had not levered up excessively prior to the US monetary tightening cycle. There are very limited signs, if at all, of a misallocation of capital or overheating in the region," the report said.

In 2013, the Indian rupee had slipped from 55 to a dollar to 65 in barely nine months, marking one of the most volatile periods for the domestic currency. In contrast, the rupee has depreciated 8% year to date.

“While Asia’s inflation has likely peaked, a renewed rise in oil prices could reinject upward impetus to the inflation path, which would, in turn, prompt a faster pace of rate hikes and higher terminal rates," the report added.

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