The Thai baht hit a one-week high on Wednesday after Thailand's finance minister said there was no need to cut interest rates further, while Asian currencies rose broadly as the dollar lost some momentum. Hopes for progress in Greek debt talks and a huge spike in European yields had triggered a 2 percent jump in the euro on Tuesday, knocking the dollar lower.
That gave some respite to Asian currencies, which had come under renewed pressure over the past couple of weeks due to market expectations for the US Federal Reserve to raise interest rates later this year. Comments by Federal Reserve board member Lael Brainard on Tuesday and the Australian dollar's rise on Wednesday after data showed the Australian economy grew at its fastest pace in a year last quarter, also weighed on the greenback, said Vishnu Varathan, senior economist for Mizuho Bank in Singapore.
Such factors have led to some profit-taking of bullish bets on the US dollar, Varathan said. Still, market participants will probably be cautious about betting aggressively against the dollar ahead of US jobs data on Friday, he said. "The mood from here may be more one of consolidation."
Some market players said the dollar's fall against Asian currencies might be more than just profit-taking. There was talk of some demand for the Taiwan dollar related to inflows, although local importers sold the Taiwan dollar against the US dollar. The Thai baht hit a one-week high of 33.60 versus the dollar, after Thailand's finance minister said there was no need for further monetary policy easing as two recent interest rate cuts were already sufficient to help the struggling economy.
Thailand's central bank will probably keep interest rates steady for the rest of the year, although there might be another rate cut in the second half if the baht were to strengthen, said Santitarn Sathirathai, head of SE Asia and India economics for Credit Suisse in Singapore. "I think Thailand is one of the...countries in Asia that would like to see the dollar strengthen. They would love to have the dollar doing their work for them," he said, adding that a fall in the baht could effectively lead to an easing in monetary conditions without necessarily adding to credit growth.
The dollar's broad retreat helped the Indonesian rupiah edge higher as Indonesian financial markets resumed trade after a holiday on Tuesday. On Monday, Indonesia's central bank relaxed some of its foreign exchange regulations to bolster and deepen the country's domestic foreign exchange market. "The main focus seems to be two-fold. One, improving intraday FX market liquidity and two, facilitating hedging by local corporates using instruments like cross currency swaps," said Divya Devesh, FX strategist for Standard Chartered Bank in Singapore.
Among the changes, Bank Indonesia relaxed a requirement that banks had to monitor and manage their net foreign exchange exposure every half an hour of the trading day, and said it could now be done at the end of the day. To deepen the foreign exchange market, Bank Indonesia also expanded its definition for derivatives to include cross currency swaps.
Comments
Comments are closed.