The Malaysian ringgit advanced more than 1 percent on Thursday, leading gains among emerging Asian currencies, as a surge in oil prices and better-than-expected fourth-quarter data eased concerns about Southeast Asia's third-largest economy. Regional currencies also found support as Federal Reserve policymakers indicated slower US interest rate hikes.
Malaysia's economy grew 4.5 percent in the fourth quarter from a year earlier, slowing from the third quarter but beating market expectations. Its current account surplus in the October-December period more than doubled from the previous three months. After the data, the ringgit rose as much as 1.6 percent to 4.1500 per dollar.
"The economic data supported the ringgit for now, but I doubt oil price rallies are sustainable," said Qi Gao, an emerging Asian currency strategist for Scotiabank in Hong Kong. Gao recommended a cautious approach on the ringgit, saying the currency is seen moving between 4.1000-4.3000. It has a chart resistance at a 200-day moving average at 4.1059.
The ringgit closely tracks crude prices as Malaysia is a major supplier of palm oil and liquefied natural gas. Crude futures rose in Asian trade after Iran welcomed plans by Russia and Saudi Arabia to cap production, while analysts said the move would not lead to any output cuts and Tehran offered no action of its own. In addition to higher oil prices, emerging Asian currencies rose on speculation that the Fed is stepping further away from plans to raise interest rates several times this year.
St. Louis Fed President James Bullard, one of the US central bank's most prominent advocates of higher borrowing costs, declared it "unwise" to move any further in light of weak inflation and global volatility. Minutes of the January Fed's meeting released on Wednesday showed that policymakers worried about tighter global financial conditions hitting the US economy and considered changing their planned path of policy tightening in 2016.
Still, some analysts warned against too much optimism toward Asian currencies. "We are in for a period of range trading for most Asian currencies. If the US data continues to improve, market will start to price Fed rate hikes back in, which will see renewed dollar strength, weighing on Asian currencies again," said Khoon Goh, senior FX strategist for ANZ in Singapore. "The oil bounce is positive for risk sentiment, and if that leads to some calm in markets, then that certainly brings Fed rate hikes back on the table."
Indonesia's rupiah gained, tracking broad strength in regional currency. The official Jakarta Interbank Spot Dollar Rate, which the central bank introduced in 2013 to manage exchange rate fluctuations, was fixed at 13,479, stronger than the previous 13,479. The rupiah pared some of earlier gains ahead of Bank Indonesia's policy decision later in the day. The central bank is expected to cut its benchmark interest rate for the second time this year to support growth in Southeast Asia's largest economy.
South Korea's won started the day firmer on improving risk appetite, but failed to hang on to the gains and ended the local session weaker as offshore funds dumped it for currency hedging. "Amid aggressive hedge among real money names, some offshore funds such as macro accounts reacted to the won's weakness," said a foreign bank trader in Seoul. "Short-term speculators could join the move," the trader added. The foreign exchange authorities continued to warn of intervention. Finance Minister Yoo Il-ho said recent movements in the dollar-won exchange rate warrant close observation by the government and officials are ready to step in if movements become too exaggerated.
Comments
Comments are closed.