Asian equities and currencies slipped on Friday as investors fled to the safe-haven dollar after Israel launched strikes on Iran's nuclear and military sites, injecting fresh uncertainty in markets already roiled by trade uncertainty.

Israel said it was declaring a state of emergency in anticipation of a missile and drone strike by Tehran, after what it called a "preemptive strike" over Iran's nuclear programme.

Oil prices surged over 9%. Rising oil prices also typically pressure emerging Asian currencies by widening current account deficits in net oil-importing countries.

The South Korean won and the Philippine peso dropped 1.1% and 0.9% each.

The Indian rupee fell 0.5%. Maybank analysts said in a note that broad dollar movements remain the major driver for Asian currencies.

An index measuring the dollar against six other currencies rose 0.4%, rebounding from multi-year lows earlier this week after a lukewarm reception to the U.S.-China trade agreement by investors and cooler inflation data boosted bets on aggressive U.S. Federal Reserve interest rate cuts.

The Thai baht weakened 0.3%. Maybank analysts said that while higher oil prices are weighing on the currency, the uptick in gold prices was also providing some support.

"We are cautious if the baht can hold decisively below the lower end of the range given risk of USD rebound. Geopolitical situation also remains uncertain and it is unclear if there can be a shift again," the analysts said.

The Malaysian ringgit lost 0.7%, in line with the broader movement, even as Malaysia stands out as the only net oil and gas exporter among the major emerging Asian economies. Bucking the trend, the Taiwan dollar rose as much as 0.5% to its highest level in three years, before turning flat.

A Taiwan-based forex trader told Reuters that while foreign investors continued to enter Taiwan, a rebound in the U.S. dollar, as well as a weakening of the South Korean won, had reduced the magnitude of the currency's appreciation.

The central bank had also acted to keep the Taiwan dollar from strengthening more, keeping the currency close to the T$29.5 mark, the trader said.

Stock markets across the region also fell. MSCI's gauge of Asian emerging market equities dropped 1.3%. South Korean shares fell up to 1.5%.

Equities in Taiwan, Singapore and Malaysia lost between 0.5% and 0.7%. HIGHLIGHTS:

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 (Reporting by Roshan Thomas in Bengaluru and Roger Tung in Taipei; Editing by Rachna Uppal)


Reuters