The US Dollar worst single day drop prompted Asian shares to climb higher as oil price increases
By Staff Writer
Feb 05, 2016 03:10 AM EST
Feb 05, 2016 03:10 AM EST
Speculation regarding no interest rate hike by the US Federal Reserve sparks a massive selling of the US Dollar causing the currency to plunge to its lowest in two months. The lower currency created a reverse effect on the Asian stock as most of the stocks rallied together with oil prices.
According to Reuters, the currency drop suffered by the US is the worst in a single day that the country ever faced outside of 1998 and 2008 economic crisis. The oil price, on the other hand, climbed by 8 percent due to the pressure by the currency and forcing other oil and energy related stocks up.
Most of the major indexes in Asia manage to rise including Shanghai Composite Index which gained 1.8 percent despite a slowdown as lots of investors slowly cashing out to prepare for the Chinese New Year celebration. Hong Kong index also feels the reverse effect of the currency drop and managed to climb 1.7 percent for Thursday trade.
However, Japan's Nikkei index is facing a different problem as the weak US currency causing the country's major export manufacturers share prices to drop along. Nikkei lost 0.8 percent for Thursday trade session according to ABC News.
Andrew Sullivan, sales trader at Haitong Securities told ABC News that the currency plunge could be a good sign as the Fed will rethink their plan not to increase the interest rate. According to Sullivan, "People are expecting the Fed to be on the back foot now. There's a lot out there that suggest the Fed that isn't going to be as bullish as it might have been earlier."
In terms of Asian currency status, The Straits Times reported that the South Korean currency, won, strengthen by 1.3 percent as of Thursday, recording its biggest gain since 2011. While elsewhere, the Malaysian ringgit also managed to strengthen against US dollar thanks to its status as Asian major net oil exporter.
The Malaysian ringgit recorded its worst plunged in the middle of last year due to lots of political turmoil together with the plunging oil prices.
Although the US dollar recorded its worst single day dropped, analysts, when interviewed, told reporters that the selloff is predicted as there are too many speculations regarding Federal Reserve that cannot be avoided. However, the strengthening of oil price is expected to start soon as lots of analysts is expecting the oil to surpass $40 this year as lots of deals has been done and interference from OPEC itself.
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