Most Asia currencies edge up as dollar steadies

Friday, 20 April 2018 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Most emerging Asian currencies inched higher on Thursday as regional equities firmed and the US dollar steadied.

Asian equity markets, apart from the Philippines, rose between 0.2% and 1.2%, supported by gains on Wall Street.

The dollar index against a basket of six major currencies was little changed around 89.633.

“We have just seen the dollar continuing to pretty much trade sideways and generally we have seen Asian currencies largely range trading, as well,” said Khoon Goh, head of Asia research, ANZ Banking Group (Singapore). “I think the market is waiting for some kind of catalyst to break out.”

The South Korean won outperformed its regional peers, gaining as much as 0.7% to touch a two-week high of 1,060.90.

CIA Director Mike Pompeo’s meeting with North Korea leader Kim Jong Un, ahead of a planned summit with President Donald Trump, helped alleviate geopolitical risk, analysts at Mizuho Bank, Singapore, wrote in a note.

On Wednesday, Trump said Pompeo’s meeting with the North Korean leader last week “went very smoothly”, but warned he would call the summit if he did not think it would produce results.

“Near term, we could see the won strengthen further. The key area I am watching now is the “Ten Sixty” (1,060) level, that is a key downside support in dollar-Korea terms,” said ANZ’s Goh.

“I think we could well see that level getting tested in the near term.”

Singapore’s dollar clocked in a small gain, while the Taiwan dollar firmed 0.05%. The Thai baht gained 0.1%.

The yuan also firmed 0.1%, furthering progress made on Wednesday after the central bank surprised markets late on Tuesday by trimming the amount of reserves banks must keep, raising concerns over the economy’s health.

The Indian rupee fell as much as about 0.3%, marking its lowest level since September. The currency is sensitive to higher oil prices as the commodity accounts for the largest portion of the country’s trade deficit.

India is due to release data on its foreign exchange reserves tomorrow.

The Philippine peso displayed resilience to gain 0.05% in the face of a 3.2% drop in the country’s equity benchmark on Thursday. In the year to yesterday’s close, investors have pulled out $682 million from Philippine equities, according to exchange data.

ANZ’s Goh said that the Philippines’ central bank is the region’s only bank which has had declining reserves, hinting at their participation support for the peso.

He added that the cost of shorting the peso led to market participants being reticent to do so.

Bank Indonesia (BI), the country’s central bank, is set to maintain its key policy rate on Thursday, replicating its actions in its past six meetings.

All 14 economists polled by Reuters see BI keeping 7-day reverse repurchase rate steady, with the deposit facility and lending facility rates being left untouched, as well.

“As inflation remains moderate, this also defers the need to hike at this juncture given more prevalent use of price control measures such as new fuel distribution regulation on top of the price freezes on fuel and electricity tariff,” Mizuho Bank analysts wrote.

In the year to date, the rupiah has weakened about 1.6% against the U.S. dollar, supplementing last year slip of around 0.7%.