Weak Commodity Prices Boon for India; Hurt Malaysia, Australia

Singapore: Many Asian currencies have eased this year while the value of commodities has hit new lows, yet the impact on each country in the region has differed with India benefiting, Indonesia seeing mixed blessings, and Malaysia and Australia being largely hurt.

Big commodity consumers like India are benefiting from lower import costs for fuels and raw materials as a smaller fall in the rupee this year means their buying power has not been eroded. The rupee has shed less than 3 per cent against the dollar this year, versus a 12 per cent decline last year.

Indonesia, one of the world's top importers of oil products, is reaping the benefits of an almost 50 per cent drop in crude prices since June and a smaller fall in its rupiah currency. But Indonesia's revenues from coal, of which it is the world's top exporter, have fallen a quarter this year.

For countries like Malaysia and Australia, which rely on commodity exports for revenues while importing most other goods, the recent developments are damaging. Falling revenues from crude oil for Malaysia, or iron ore and coal for Australia are also devaluing their currencies, making imports costly and threatening Australia's first recession in 20 years.

"In energy and bulk commodities, supply growth still remains strong and should only add to the (negative) macro headlines ... The stronger US$ and tightening monetary policy in the US will have slightly negative repercussions for commodities," ANZ bank said in a recent note.

Copyright: Thomson Reuters 2014