The war in Iran has meant a revolution for all asset classesamong which are currencies, about which Ebury, the global fintech specialized in international payments, believes that The euro, the South Korean won, the Indian rupee and the Thai baht will be «among the most affected currencies»in a context marked by rising energy prices and increased risk aversion.» The common denominator of these currencies, they explain, «is its high dependence on oil and gas importswhich makes them especially vulnerable to an energy shock derived from the closure of the Strait of Hormuz.» In the case of the euro, they believe that «the exhibition is particularly significant«, since «the eurozone faces the conflict with low levels of gas reserves and a strong dependence on external suppliers», while «US military action in Iran increases the risk of a longer conflict in Ukraine, as US military resources could be diverted from this conflict to the Middle East.» «On the other hand, Europe’s exposure to imported oil inflation it means that markets have aggressively increased bets on higher ECB rates and, at least so far, two full cuts before the end of the year are more than fully discounted,» they add. Furthermore, This pattern «is replicated in the currencies of Asia and, in particular, in the South Korean won, the Indian rupee and the Thai baht«, since all of them stand out for their «high exposure to the crude oil that transits through the Strait of Hormuz.» «The Rising oil prices act as a drag on their economies, deteriorating their external accounts and increasing inflationary tensions, which translates into less resilience of their currencies. Ebury also includes among the losers some currencies of East and Southern African countries, whose economies depend on the region for about 75% of their fuel imports. In this group we would find the South African rand, the Zambian kwacha and the Ugandan shilling,» they add. In Latin America, they believe that The most vulnerable currencies would be the Chilean pesogiven that «it imports almost all of its oil and gas consumption» and, to a lesser extent, the Peruvian sol, which «produces modest amounts of oil, is a net exporter of natural gas and has some refining capacity.»
WINNING CURRENCIES
Faced with this block of losers, Ebury identifies the US dollar, the Canadian dollar, the Norwegian krone, the Australian dollar, the Brazilian real or the Colombian peso as the main beneficiaries.. The US dollar leads this group thanks to its «role as a safe-haven asset in episodes of uncertainty and the fact that the United States is a net energy exporter, allowing it to benefit from a high price environment.» In turn, currencies such as the Canadian dollar, the Norwegian krone or the Australian dollar «They are supported by their status as large oil and gas exporters, which improves their terms of trade and strengthens their external accounts.» In Latin America, the Brazilian real and the Colombian peso They also find support in the increase in income derived from energy exports. «Dollar-linked currencies, especially in the Middle East, have shown remarkable resilience, benefiting from both their peg to the greenback and rising oil prices, which bolster their external accounts and reserves. This group also includes the Chinese yuan, closely managed against the dollar and backed by ample energy reserves and less direct exposure to conflict. China also has diversified suppliers and certain protection in transit through the Strait of Hormuz.«, they highlight. As an aside, Ebury points out the pound sterling «as an intermediate case within the block of favored currencies.» «Without being considered a complete winner, the British currency has shown a stronger relative performance than its European counterparts. Although the United Kingdom is a net energy importer, its lower dependence on foreign supplies – and, in particular, from the Middle East – limits its exposure to the energy shock. Added to this is a more service-oriented economic structure,» they comment. Overall, Ebury’s analysis reflects a «clear divergence in the forex market«, whereby «the currencies of energy-importing economies, such as the euro or the Indian rupee, tend to depreciate, while those of exporting countries or considered refuges, such as the US dollar or the Norwegian krone, are strengthened in a scenario of prolonged conflict.»
