SEOUL, Oct 17: The Thai baht led gains among emerging Asian currencies on Thursday as risk sentiment improved after U.S. Lawmakers approved a deal that averts a potential default for the world’s largest economy.
The baht rose on strong local stocks and bonds. The Malaysian ringgit hit a near one-month high as investors cut dollar holdings.
The Philippine peso advanced on short-covering. The South Korean won touched a nine-month peak as foreign investors were set to extend their net stock buying spree to a record 35th session.
The U.S. Congress agreed on a deal to lift the country’s borrowing limit late on Wednesday and President Barack Obama signed the bill and said the government was reopening ‘immediately’.
Still, investors hesitated to chase emerging Asian currencies as the U.S. Deal has not resolved the fundamental problems of spending and deficits that divide Republican and Democrats.
‘The deal merely pushes the deadlines to early next year, which means a similar drama could happen again,’ said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong.
‘Sentiment would be broadly supported, but since much optimism had been priced in by Asian currencies, the reaction there may be relatively muted,’ Cheung added.
Most emerging Asian currencies gained during the first three days this week on optimism that U.S. Lawmakers would reach an agreement to avoid a default.
BAHT
The baht gained as Bangkok shares rose more than 1 percent.
The five-year bond yield slid to 3.55 percent, the lowest since July 23.
RINGGIT
The ringgit rose as much as 0.5 percent to 3.1560 per dollar, its strongest since Sept. 20, as investors added long positions in the Malaysian currency.
Three-year government bond yield fell to 3.190 percent, the lowest since June 19, and Kuala Lumpur stocks rose 0.4 percent.
Still, some investors such as leveraged funds took profit from the ringgit when it was firmer than 3.1600 per dollar.
Even though the American government is reopening, ‘the U.S. situation is unclear,’ said a senior Malaysian bank trader in Kuala Lumpur.
‘Nobody knows when the Fed tapering will happen. If the U.S. economy is good and rates are firm, the dollar should be higher,’ the trader added.
PHILIPPINE PESO
The peso advanced as investors covered short positions in the currency, which had underperformed in Asia this week.
The Philippine currency fell 0.1 percent in the first three days of the week, while most emerging Asian currencies gained.
Investors, however, hesitated to chase the peso, staying cautious over possible intervention by the central bank.
‘It looks like the resolution in Washington has a positive effect on risk assets in the short term,’ said a senior Philippine bank trader in Manila.
‘Still, I expect official support (for dollar/peso) to come in between 43.05 down to 43.00,’ the trader added.
(agencies)
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