Rising oil prices negative for Asia currencies: Report

Higher oil prices leading to a global economic slowdown could negatively impact a number of Asian currencies, says a new report from Nomura International.

Currencies like the Indian rupee, Philippine peso, Korean won and Thai bhat will be the worst affected by rising oil prices, given their dependence on oil imports, says the report from the global financial services firm. "We believe that higher oil prices are negative for most Asian currencies. The high levels of import intensity and vulnerability to a global growth slowdown should trump any policy tightening," the report said. Brent crude hit its highest level since 2008 at USD 128 a barrel on Thursday after false reports of a pipeline explosion in Saudi Arabia - the world`s biggest oil producer. The Asian currency that faces the "greatest headwinds" from rising oil prices is the Indian rupee, says Paul Mackel, Head of Asia Currency Research, HSBC. India imports 70% of its oil requirements.

"Currencies which obviously cannot benefit in this type of fear factor regarding oil is clearly the rupee," Mackel said. "But the difficulty is that it`s actually quite hard to short the currency when you have the carry being so high. The yield on the currency is very, very high, so it`s going to be very difficult." But, in a worst-case scenario if oil prices jumped at a much faster pace than seen so far, then shorting the Indian rupee could be a trade worth considering, Mackel added.

The Malaysian ringgit, meanwhile, is expected to outperform as the currency of a major oil exporter. HSBC`s Mackel recommends going long on the ringgit.

"Its probably somewhat of a consensus view to like the ringgit in this type of environment," he said. Copyright 2011 cnbc.com