Asia currencies drop as dollar gains raise import costs

Asia-Pacific currencies fell further against the dollar in Asia trading today, adding to costs for the region's big importers of oil and other commodities, while the UK pound slumped by almost 5pc to a near 40-year low.

The Korean won, Japanese yen and Indian rupee all weakened against the dollar in early trading, extending multi-year lows.

The Chinese yuan weakened to above Yn7.15 to the dollar. That prompted China's central bank to intervene to prop up the yuan by raising the cost of shorting the currency, which weakened to more than Yn7 to the dollar earlier this month for the first time in over two years.

Aggressive moves by the US Federal Reserve to raise interest rates have boosted the value of the dollar against rival currencies in recent months. Oil and other commodities are priced in dollars, so a stronger US currency adds to costs for importers.

The biggest declines were recorded by the UK pound. Sterling dropped by 4.7pc against the dollar in early trading to as low as $1.03, before recovering slightly to just under $1.06 at 10.30am Singapore time (02:30 GMT), still down by around 2.6pc.

The UK government's plans to cut taxes, announced by the country's new chancellor Kwasi Kwarteng last week, have accelerated a sell-off in sterling.

Oil prices were largely steady, with the Ice front-month November Brent contract edging higher to $86.36/bl at 10.30am Singapore time. The contract slumped by almost 5pc to close at $86.15/bl on 23 September.

By Kevin Foster