Asian Currencies Torn Between Weaker Dollar and Higher Oil Prices

Asian currencies are caught between two opposing forces: a weakening US dollar and rising oil prices. The softer dollar has provided relief to emerging-market currencies, with the Taiwan dollar hitting its strongest level in nearly two months.

The US dollar's decline is largely due to softer US data, which has lowered expectations for a Federal Reserve rate hike next month. This reduction in interest rates tends to help emerging-market currencies by easing pressure from high US rates.

However, higher oil prices are creating a headwind for some Asian economies. When oil rises, these countries pay more for energy imports, widening their current-account deficit and increasing demand for dollars.