Most emerging Asian currencies rose on Thursday, helped by growing hopes for increased inflows amid signs of the United States' and China economies stabilising, while expectations of further Bank of Japan easing added support. The South Korean won hit a near one-year high against the dollar and strengthened past a long-term chart resistance versus the yen.
The Malaysian ringgit advanced on market talk of real money funds' inflows and the Philippine peso rose despite views that the central bank will cut interest rates later in the day. The euro and Asian shares also gained, supporting emerging Asian currencies, dealers said. That came as the Fed acknowledged some parts of the world's top economy were looking a bit better, while sticking to its plan to keep stimulating US growth until the job market improves.
Most emerging Asian currencies have been major beneficiaries of easing by major central banks as those steps prompted investors to seek higher yields in better economic and fiscal fundamentals. The BoJ has been expected to unveil further monetary stimulus at its meeting on October 30 in a bid to help the export-focused economy through a global slowdown. These expectations lifted emerging Asian currencies, such as the won and the Singapore dollar to highs not seen in more than six months.
Still, the path of appreciation in emerging Asian currencies may not be altogether smooth as regional authorities are expected to stem currency gains because of the still-sluggish global economy, dealers and analysts said. South Korea's foreign exchange authorities were spotted buying dollars to stem the won's further appreciation, especially after it strengthened past the psychologically important 1,100, dealers said. That came as major exporters such as Hyundai Motor Co compete against Japanese peers including Toyota Motor Corp.
The Singapore dollar did not even touch 1.2200 to the greenback with investors wary of intervention by the central bank. That caution intensified as data showed the city-state's industrial output surprisingly fell in September. Maybank's Supaat said the upcoming US presidential election may also rattle the market.
"For now, main event in the tail-end of the year is the risk of possible volatility around the US elections and the possible effect on the dollar and US fiscal deliberations until the Presidential inauguration in late January." The won hit 1,097.7 per dollar, its strongest since October 28 last year as offshore funds and South Korean exporters chased it. It may head to 1,094.5, the won's strongest since October 28, 2011.
Against the yen, the South Korean currency touched 13.7059, its highest since April 6, breaking through a 200-week moving average at 13.7219. The won had been weaker than the average since early 2008. The next target would be 13.3932, the yen/won's low on March 15. The ringgit gained on market talk of demand from real money funds and dollar selling linked to daily fixing.
But some interbank speculators took profits before a holiday, capping the local unit's upside. Malaysian financial markets will be closed on Friday to mark the Hari Raya Haji. Markets in Indonesia, Philippines and Singapore will be also be shut. The Philippine peso rose even though Bangko Sentral ng Pilipinas (BSP) is expected to cut its key policy rate for a fourth time this year to support economic growth threatened by weak exports and a strong peso.
The expectations have been largely priced in the peso, currency dealers said. A European bank dealer in Manila said the second best performing Asian currency is likely to strengthen further once the central bank cuts rates. "A rate cut will just buy BSP some time, but next week it will be a different story," the dealer said, expecting the peso to strengthen to as firm as 41.10 per dollar. Financial markets in Philippines will be closed on November 1 and November 2 for holidays.
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