1. Stronger risk sentiment helps most currencies; Taiwan dollar near three-week high

Stronger risk sentiment helps most currencies; Taiwan dollar near three-week high

Most Asian currencies edged higher on Monday, supported by a slight return in risk appetite though investors remained wary of the ongoing political turmoil in Washington.

By: | Published: May 22, 2017 2:50 PM
Asian investors were assessing renewed tensions in the Korean peninsula after North Korea fired a ballistic missile into waters off its east coast on Sunday.

Most Asian currencies edged higher on Monday, supported by a slight return in risk appetite though investors remained wary of the ongoing political turmoil in Washington. Asian investors were assessing renewed tensions in the Korean peninsula after North Korea fired a ballistic missile into waters off its east coast on Sunday, but most were taking the North’s second missile test in a week in their stride.

The South Korean won, traditionally sensitive to North Korea’s antics, rose nearly 1 percent against the dollar, which hovered near six-month lows. “This week’s initial momentum seems to be risk-on, that is going to be supportive of Asian currencies,” said Vishnu Varathan, a senior economist at Mizuho Bank.

“While investors are quite wary of a lot of risks out there, they seem to be looking past them. This is also turning out to be slightly positive for equity market sentiments, which seem to be coming out of the safe-haven mode.” Asian stocks excluding Japan posted their biggest intra-day gain in close to a month.

Markets may seek consolation from the FOMC minutes due on Wednesday, which may potentially slightly lift US Treasury yields, Varathan added. U.S. Treasury yields fell to near one-month lows on Friday as investors worried that allegations against U.S. President Donald Trump would disrupt his plans to cut taxes and increase spending.

Investors are also eyeing the OPEC meeting on Thursday with the oil cartel and other producers on course to agree on extending supply cuts by a further nine months until next March. The Singapore dollar and Thai baht, fell about 0.2 percent and 0.3 percent, respectively, tracking weakness in the Japanese yen, which was about 0.2 percent lower.

A Reuters poll showed Singapore’s consumer price index in April probably rose 0.7 percent from a year earlier, unchanged from the previous month’s pace. The inflation numbers are due on Tuesday. The CPI numbers, however, are not likely to shift the central bank’s neutral policy stance.

UPGRADE BOOSTS RUPIAH

The rupiah continued its upward momentum, recovering from earlier losses on Friday after rating agency Standard & Poor’s (S&P) upgraded Indonesia’s sovereign ratings to investment grade. S&P’s move was long awaited and came after Fitch upgraded Indonesia to investment grade in December 2011 and Moody’s in January 2012.

“Unanimous IG ratings (is) opening up Indonesian assets to institutional investors who had earlier been bound by IG mandate. And so this upgrade may still prompt “reactionary” or pent-up allocation into Indonesian equities and bonds,” Mizuho Bank said in a note. As of Friday, foreign net buying in Indonesian stocks stood at 28 trillion rupiah ($2.11 billion), compared with 16.2 trillion rupiah in all of last year.

INFLOWS LIFT TAIWAN DOLLAR

The Taiwan dollar rose to its highest in nearly three weeks, up 0.6 percent against the dollar to 30.019, on the back of continued foreign fund flows. The Taiwan dollar has risen about 7.5 percent so far this year, the second biggest gainer in the region after the Korean won, which has added 8.1 percent. In March, Taiwan’s central bank had refrained from intervention to weaken the Taiwan dollar, fearful of being labelled a currency manipulator by Trump.

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