1. Asian currencies tread water; yuan headed for worst week since March

Asian currencies tread water; yuan headed for worst week since March

Most emerging Asian currencies were range-bound on Friday as traders marked time ahead of next week's US inflation-linked indicators, while China's yuan remained on track for its biggest weekly fall since early March.

By: | Updated: June 23, 2017 12:20 PM
The Singapore dollar was among the biggest gainers, edging up 0.1 percent, which was boosted by news Singapore’s industrial production in May grew for the 10th consecutive month from a year earlier.

Most emerging Asian currencies were range-bound on Friday as traders marked time ahead of next week’s US inflation-linked indicators, while China’s yuan remained on track for its biggest weekly fall since early March. The US data due next week include the June consumer confidence indicator, pending home sales, crude oil inventories, revised first-quarter GDP and the PCE price index. The dollar index against a basket of major currencies was effectively flat at 97.492.

The Singapore dollar was among the biggest gainers, edging up 0.1 percent, which was boosted by news Singapore’s industrial production in May grew for the 10th consecutive month from a year earlier. The currency, however, remains on track for its biggest weekly fall since early May.

“The confluence of a slightly more aggressive pace of FOMC balance-sheet unwinding, as well as a still intended third 25 basis points rate hike later this year, have contributed to a higher dollar against the Singapore currency,” OCBC Bank said in a note.

The Philippine peso edged up 0.1 percent after the central bank left key interest rates unchanged and cut its forecast for inflation this year, a move likely to reduce expectations for at least one rate hike in the second half. Despite the modest gains, the Philippine currency is headed for its worst week since Nov. 2016. The Taiwanese dollar traded flat against the dollar after Taiwan’s central bank left its policy rate unchanged, as widely expected, with robust tech exports providing a strong anchor for the economy and inflation remaining subdued.

CHINESE YUAN

The yuan edged lower on Friday to its weakest since May 31, dampened by weaker guidance and rising corporate demand for the dollar. The Chinese currency is down 0.4 percent for the week, on track for its biggest weekly fall since March 3. Several traders noted that major state-owned banks were selling dollars to keep the spot yuan at firmer-than-6.83-per-dollar levels in late afternoon trade this week. The yuan is headed for its seventh falling day in what would be its longest streak of losses since Oct. 2016.

MALAYSIAN RINGGIT

The Malaysian ringgit was trading within a narrow range on Friday, as it remains on track for its biggest weekly fall since early March. On Thursday, Standard and Poor’s said the corruption scandal at 1Malaysia Development Berhad (1MDB) and upcoming elections pose potential challenges for Malaysia’s sovereign rating in the short term. S&P also flagged a few credit risks: high share of foreign ownership of Malaysia’s ringgit-denominated government bonds, and the central bank’s record-high forward position on its foreign-exchange reserves. Foreigners, who had held about half of the outstanding Malaysian government bonds, fled the market between November 2016 and March this year after the central bank said it could no longer trade in ringgit non-deliverable forwards. Investors started to return in April.

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