Dollar Strength Squeezes Emerging Asia Markets Amid Oil Price Surge

Emerging Asia markets took a hit on Tuesday as a strengthening US dollar and rising oil prices weighed heavily on regional currencies and stocks.

The combination of factors, which included 10-year Treasury yields nearing 5%, has led to a shift in global investor sentiment, with some money rotating out of riskier emerging-market assets and into relatively safe Treasuries.

This move has lifted the US dollar, posing a problem for economies that rely on dollar funding or import essentials priced in dollars. Net oil importers in emerging Asia are particularly vulnerable to this squeeze, as higher energy bills worsen trade balances and weaken local currencies.

The Philippines and Thailand were among the hardest-hit markets, with their stock benchmarks falling by as much as 0.8% and 0.9%, respectively. The attack on Saudi energy infrastructure by Yemen's Iran-aligned Houthis has also contributed to rising oil prices and concerns about fuel costs keeping inflation sticky.