Solid U.S. jobs data fans Asia FX; ringgit hits over 7-month high

Written by Reuters | Singapore | Updated: Jul 4 2014, 17:50pm hrs
PesoTraders took some profits as Malaysia's trade surplus in May missed expectations. (Photo: Reuters)
Most emerging Asian currencies rose on Friday and were on track for weekly gains after surprisingly strong U.S. jobs data boosted risk appetites rather than cause worries that the Federal Reserve might start raising interest rates. The ringgit hit its highest level in more than seven months as investors expected inflows linked to 1Malaysia Development Bhd's (1MDB) plan to raise more than $3 billion through a stock market listing of its energy assets. The Philippine peso rose as the central bank is still expected to raise interest rates for the first time in three years as early as this month despite slower than-expected June inflation. Indonesia's rupiah gained on capital inflows and growing caution over possible intervention by the central bank to support the currency before Wednesday's presidential election. The dollar hovered near one-week highs against a basket of six major currencies after data on Thursday showed U.S. nonfarm payrolls (NFP) blew away most forecasts by rising 288,000 jobs in June. The healthy number bolstered Asian stocks and investors focused on growing risk appetites rather than expectations of a U.S. rate hike by the Fed. Emerging Asian currencies are likely to benefit in the short term from easier monetary policies of other major central banks, traders and analysts said. "It really depends on whether the post-NFP dollar euphoria can dislodge the search for yield amidst the current risk-on environment," said Emmanuel Ng, a foreign exchange strategist for OCBC Bank in Singapore. "That's the conundrum. Few are willing to join the Fed's party as yet, so carry may have legs yet," said Ng, adding that emerging Asian currencies are likely to stay firm for the time being. On Thursday, the European Central Bank left interest rates steady at record lows as expected, but said it stood ready to do more if necessary. Sweden's central bank slashed its key interest rate to 0.25 percent on Thursday, more than forecast. Such policies, along with a dovish Fed Chair Janet Yellen, caused investors to seek higher yields in Asia, helping regional currencies remain on the course for a second consecutive week of gains. So far this week, the rupiah has led regional appreciation with a nearly 1.0 percent rise against the dollar, according to Thomson Reuters data. At one point this week, the Indonesian currency had gained as much as 2 percent on expectations of a sizable trade surplus, but was pared when the surplus was disappointingly small. The ringgit followed it, having risen 0.8 percent. The Indian rupee, the South Korean won and the peso have each appreciated 0.5 percent.

RINGGIT- The ringgit gained as much as 0.4 percent to 3.1835 per dollar, its strongest since Nov. 21. A break of 3.2000 on Thursday triggered stop-loss dollar selling and exporters chased the Malaysian currency, traders said. Its non-deliverable forwards gained on demand from offshore hedge funds. Traders took some profits as Malaysia's trade surplus in May missed expectations, with higher import growth. Investors are keeping an eye on a monetary policy decision on July 10 as the central bank at the previous meeting signalled it may need to tighten monetary policy soon to counter a "continued build-up of financial imbalances".

PHILIPPINE PESO- The peso rose as Manila shares hit a 13-month high again. Earlier, the peso eased to as weak as 43.65 per dollar after data showing Philippine inflation in June came in slightly softer than market forecasts. The central bank governor said the monetary authority remains mindful of risks to inflation and will adjust monetary policy if needed. With expectations of a rate hike alive, the Philippine currency is expected to stay firm, traders said. "Today's CPI number lowered chances of a rate hike this month. But the market is looking at the longer term," said a senior Philippine bank trader in Manila. "Carry trades are still looking favoured in EM space," the trader said, referring to emerging markets.

The rupiah rose as investors covered short positions ahead of the presidential election on July 9. Foreign banks bought spot rupiah, while its non-deliverable forwards strengthened. Investors stayed wary of possible intervention. One trader in Jakarta said he suspected foreign banks bought the rupiah on behalf of the central bank. The official Jakarta Interbank Spot Dollar Rate, which Indonesia's central bank launched last year in an effort to manage exchange rate fluctuations, was fixed at 11,887 per dollar, firmer than the previous session's 11,963.