Most Asian currencies edged up against the dollar on Tuesday, though the same global developments that hurt the greenback also reduced risk appetites for cautious investors. Against the yen, the dollar was down 0.6 percent to 109.770 yen, its lowest since April 25. Investors were worried about the Middle East and terror attacks, and were awaiting the British election, a policy meeting of the European Central Bank and congressional testimony in Washington of former FBI director James Comey – all on Thursday.
“It is a pretty stressful week for the traders as we get towards these hard points such as the ECB policy meeting, UK elections and upcoming Comey testimony” said Stephen Innes, senior trader at OANDA. “People are getting a little bit nervous about not only holding U.S. dollar but generally the global landscape now.” Despite a drop in oil prices, the Malaysian ringgit registered a rise for the third consecutive day.
Some analysts said the escalating tensions in the Middle East could benefit Malaysia’s LNG exports. “Malaysia is the world’s third largest exporter of LNG after Qatar and Australia, so the Gulf nations’ fallout with Qatar could potentially raise demand for Malaysian LNG products,” Bank of Tokyo-Mitsubishi UFJ said in a research note. Benign Philippine May inflation data – with the pace the slowest in four months – pulled down the peso as expectations of a less aggressive stance from the central bank grew.
After the inflation data, ING cut its forecast for the central bank’s policy rate hikes to just one this year from two earlier. China’s yuan firmed against the U.S. dollar after the official midpoint was fixed at a near seven-month high, shrugging off the central bank’s huge cash injection into the financial system. South Korean markets were closed on Tuesday but the offshore non-deliverable forwards contracts (NDFs) showed the won appreciating against the dollar by nearly quarter of a percent.
The Thai baht was up 0.07 percent at 33.975 against the dollar, the highest in nearly two years. The baht rise came on relief that the central bank did not introduce stricter measures to curb the strength of the baht, which has appreciated more than 5 percent against the dollar this year.
The Bank of Thailand said on Monday it would relax foreign exchange rules, including taking steps to allow more Thais to invest in securities abroad. “These measures should encourage greater outflows in search of higher returns, with the yield differentials between the UST and Thai government bonds narrowing as the Fed hikes its short-term rates,” Maybank said in a note on Monday. Among
Among Southeast Asian currencies, the baht has had the biggest gain against the dollar this year. Foreign bond holdings as a percent of total Thai bonds outstanding stood at 8.6 percent at the end of April, comparing to foreign holdings of over 30 percent in Malaysian and Indonesian bonds.