Asian currencies pushed higher on Monday, as the dollar remained under pressure after the U.S. Federal Reserve last week signalled fewer interest rate hikes this year than some investors had expected. The Taiwan dollar, hit its highest level in about 22 months at 30.465 per US dollar, buoyed by foreign fund inflows. The Thai baht rose to around 34.66 at one point, its strongest level since early October. Dollar-selling by foreign names and funds, as well as local exporters, helped give a boost to the baht.
The South Korean won also touched a five-month high of 1,121.1 per U.S. Dollar. Dollar bulls were disappointed last week after the Fed raised interest rates as expected and stuck to its outlook for three rate hikes in 2017, instead of the four some had grown to expect. “It’s still dollar weakness. I think that’s the persistent theme,” said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia. Asian currencies are generally supported by dollar weakness and positive risk sentiment after last week’s Fed meeting, as well as growing expectations that monetary policies around the world could become more synchronised, including possible policy tightening by central banks in Asia, Ji said.
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The dollar’s pullback after last week’s Fed meeting partly reflects market positioning, market participants said. The market is continuing to offload long positions in the U.S. dollar, said a trader for a Malaysian bank in Kuala Lumpur. Currency markets showed limited initial reaction to the Group of 20 meeting over the weekend which retained the familiar form of words on currency intervention but dropped a pledge to avoid trade protectionism.