SINGAPORE, Sept 9: Most emerging Asian currencies rose on Monday as investors covered short positions after lukewarm U.S. Job data and stronger-than-expected China exports that lifted regional stocks.
The South Korean won hit a four-month high on sustained stock inflows, while the Taiwan dollar outperformed regional peers thanks to demand from foreign financial institutions.
The Malaysian ringgit and the Philippine peso
Advanced as investors cut bearish positions.
U.S. Employers in August hired fewer people than expected, sparking views that the Federal Reserve will still cut its stimulus this month, but by less than earlier anticipated.
China’s exports grew more than forecast last month in another sign of stabilisation in the world’s second-largest economy.
Still, emerging Asian currencies are unlikely to appreciate further as long as investors maintain expectations that the Fed may dial down its quantitative easing, analysts and traders said.
‘The weak jobs data hasn’t changed expectations for the Fed to start tapering soon,’ said Frances Cheung, Credit Agricole CIB’s senior strategist in Hong Kong.
‘There is scope for renewed weakness in the coming weeks, before a rebound some time in the fourth quarter,’ Cheung added, when asked if emerging Asian currencies would fall further.
Most U.S. Primary dealers expect the Fed, at its policy meeting on Sept. 17-18, will cut the size of its bond purchases, according to a Reuters poll.
‘Asia will see more weakness heading into the Fed meeting,’ said Sean Yokota, head of Asia strategy at Scandinavian bank SEB in Singapore.
‘At this stage, Fed is the dominant factor since it is at the very beginning of the cyclical recovery in Asia and the positive outlook still has risks whereas the impact of Fed tapering carries more certainty.’
The South Korean won has bucked the recent trend of depreciation among emerging Asian currencies as investors chased the country’s assets due to economic and fiscal fundamentals that are stronger than others in Asia.
However, Yokota said the won is likely to track regional weakness eventually.
WON
The won rose as much as 1,087.3 per dollar, its strongest since May 9, as foreign investors extended a buying spree to a 12th consecutive session.
Foreign investors have bought a combined net 3.4 trillion won ($3.1 billion) in Seoul’s main stock market, according to Korea Exchange data.
Still, lingering caution over possible intervention by foreign exchange authorities limited the won’s upside. Importers also bought dollars on dips, traders said.
‘The won stays on an appreciation trend and may head to 1,080,’ said a senior foreign bank trader in Seoul.
‘But exporters are likely to wait for better levels to buy amid intervention risks,’ he added.
The South Korean currency is seen facing chart resistance at 1,083.0, the high of May 9. The next resistance stands at 1,080.2, the 76.4 percent Fibonacci retracement of its depreciation from January through June.
TAIWAN DOLLAR
The Taiwan dollar advanced on inflows from foreign financial institutions and as exporters lined up to buy it for settlements around 29.800 to the U.S. Dollar.
But the central bank was spotted intervening to stem its appreciation, traders said.
Domestic importers also purchased the greenback around 29.730, according to traders.
RINGGIT
The ringgit gained as three- and five-year government bond yields fell.
Investors, however, hesitated to buy the currency on sustained concerns over the Fed’s reduction in stimulus and Malaysia’s fiscal deficit.
A senior Malaysian bank trader in Kuala Lumpur said the ringgit is unlikely to strengthen past 3.3000 per dollar and he would sell the ringgit around the level for 3.3400.
‘Market is focusing on Southeast Asia due to structural problems with twin-deficits,’ the trader said.
‘Malaysia still sees trade and current account surpluses, but they are deteriorating,’ he added.
PHILIPPINE PESO
The peso started the local trade at 44.25 per dollar, but investors sold the Philippine currency from the session high.
It is expected to stay under pressure from local companies’ mid-month dollar demand, traders said. The Fed is still seen scaling back its bond-buying programme, they added.
‘The Fed tapering is still the talk,’ said a foreign bank trader in Manila.
(agencies)
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