SINGAPORE, Mar 18: Most emerging Asian currencies held firm on Wednesday after the dollar retreated on weak U.S. housing data, but many investors were on the sidelines awaiting the Federal Reserve’s policy decision later in the day. China’s yuan hit a two-month low as the central bank was suspected of intervening to support the currency and set its midpoint stronger.
The Taiwan dollar and the South Korean won rose on stock inflows.
Still, market players were cautious as the Fed is expected to drop its reference to being patient on policy in its forward guidance, indicating the U.S. central bank may start raising interest rates soon.
The Philippine peso fell to its lowest in nearly two months as such expectations caused investors to take profits from recent gains.
The Singapore dollar edged down as a central bank survey showed private economists cut the city-state’s economic growth and inflation forecasts for this year. ‘While it may be less likely that we see anything done on U.S. rates before June, which would coincide with a full forecast update, a removal of ‘patience’ would certainly be USD-bullish and volatility enhancing,’ Sacha Tihanyi, senior currency strategist for Scotiabank, said in a research note. ‘USD/Asia will trade in direct sympathy with the overall USD move, and the more pained will the high-beta currencies the higher we see shorter term U.S. yields rise.’ TAIWAN DOLLAR
The Taiwan dollar rose as local shares jumped more than 1 percent with foreign buying.
The central bank has not been spotted intervening to stem the currency’s appreciation, traders said. Still, traders hesitated to chase the currency before the Fed’s policy decision, while local importers bought the U.S. dollar for payments on dips.
WON
The won rose as foreign investors were set to become net buyers of local shares for a fourth straight session. Foreign investors bought a combined net 609.6 billion won worth of Seoul stocks in the previous three sessions, Korea Exchange data showed. On Tuesday, they absorbed a net 498.9 billion won, the largest daily net purchase since July 30. Caution prevailed over the Fed, but traders said the won has largely priced in the U.S. central bank’s expected drop of the word ‘patient’ with less hawkish comments. The won may extend gains if the Fed maintains the wording or takes a dovish stance by providing slower inflation forecasts, traders said.
‘We are seeing a liquidity rally here especially after the ECB’s quantitative easing,’ said a foreign bank trader in Seoul. ‘Given stock inflows, if the dollar suffers a correction, the impact on the won would be big.’
PHILIPPINE PESO
The peso lost 0.4 percent to 44.73 per dollar, its weakest since Jan. 20, as investors scrambled for the greenback to cover short positions.
The Philippine currency also fell in non-deliverable forwards markets as offshore funds continued to cut bullish bets. Spot peso is likely to weaken further, probably to 44.75, low of Jan. 19 and Jan. 14, a trader said. Government bond prices fell with the five-year yield up to 3.961 percent, its highest since Nov. 19. (AGENCIES)
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