1. Asian currencies rise on French election relief

Asian currencies rise on French election relief

Asian currencies edged up on Monday as markets breathed a sigh of relief after centrist Emmanuel Macron was elected French President following a resounding victory over far-right Marine Le Pen, who had threatened to take France out of the European Union.

By: | Published: May 8, 2017 1:28 PM
The Indian rupee led the gainers in the region thanks to strong equity markets, in a sign foreign investors were returning after turning net sellers last week.

Asian currencies edged up on Monday as markets breathed a sigh of relief after centrist Emmanuel Macron was elected French President following a resounding victory over far-right Marine Le Pen, who had threatened to take France out of the European Union. The resulting bounce in risk appetite boosted Asian shares by over half a percent and crude oil by more than 1 percent. Macron’s win put to bed fears of another populist upheaval after Britain’s vote to exit the European Union last year spread turmoil in global markets.

Elections were very much the focus in South Korea too, with the won up a touch ahead of Tuesday’s presidential vote in which leading liberal candidate Moon Jae-in likely to emerge victorious. Moon, the son of North Korean refugees who came to the South during the 1950-53 Korean War, would end nine years of conservative rule in Seoul if elected, a time when Pyongyang stepped up its nuclear and missile tests. The Indian rupee led the gainers in the region thanks to strong equity markets, in a sign foreign investors were returning after turning net sellers last week.

The Indonesian rupiah was trading flat after the Bank Indonesia’s chief said the central bank has been intervening in the foreign exchange market to curb strong rupiah appreciation. The rupiah, which climbed 2 percent this year up until mid-April, has lost about half a percent since then.

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In the United States, fresh data suggested the Federal Reserve is on course for a June rate hike, but pressure on regional currencies could be limited as markets are more or less priced in for a Fed move. Friday’s U.S. jobs data showed a sharp rebound in April that pointed to a tightening labor market. “Fed rate hike for June is almost 100 percent priced in. Hence dollar movement can be limited against Asian currencies,” said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken.

CHINA’S YUAN

China’s yuan was trading flat against the dollar, but the reaction was limited to official data showing April’s exports data missed market expectations. However, some analysts were bullish on the yuan, with the 10-year treasury yield touching the highest level in nearly two years on Monday in the wake of Beijing’s stepped-up campaign to reduce leverage and ward off risks in the financial system. “People should go long on CNH over the next two months. The impact of leverage is to cool than crush the market,” said Yokota, who expects CNH to trade at 6.82 levels in two to three months time. The offshore yuan was currently trading at 6.9030 per dollar. The official data also showed China’s foreign exchange reserves rose in April for a third straight month which indicated China could afford to support the yuan to discourage bearish-yuan bets that might spur capital outflows.

SOUTH KOREAN WON

The South Korean won was up 0.14 percent against the dollar ahead of the presidential election on Tuesday. The elections results are expected to bring some political certainty after former president Park Geun-hye was ousted in March over corruption charges. “Regardless the final results, this election is viewed positively by investors as it is widely expected to end the uncertainties brought by the former President Park’s impeachment,” DBS said in a note. Few pre-polls show liberal candidate Moon is likely to emerge victorious. Among other things, Moon advocates a removal of the US THAAD missile defense system and re-engaging North Korea in talks, which would appease both China and its antagonistic northern neighbour.

(Reporting By Patturaja Murugaboopathy in Bengaluru,; Editing by Shri Navaratnam)

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