Asian currencies rose slightly on Thursday as the dollar remained shaky on expectations the US Federal Reserve will soon pause its tightening cycle, while renewed optimism over a Sino-US trade deal lifted appetite for riskier assets. Minutes from the Fed's policy meeting last month showed that several policymakers did not feel the need to rush into further rate increases in the face of global growth concerns.
In other developments, China's commerce ministry said trade talks between the world's top two economies this week were extensive, and helped establish a foundation for the resolution of each others' concerns. Vishnu Varathan, a senior economist at Mizuho Bank, said in a note on Thursday that investors in Asian currencies are likely to remain patient as they followed the progress of the Sino-US trade talks.
The Indonesian rupiah extended its positive start to the year, gaining as much as 0.7 percent in the session for around a 2.5 percent rise so far in 2019. The Malaysian ringgit was another highlight on the day, up 0.5 percent to 4.093 against the dollar, its highest level in more than four months.
The Korean won also rose 0.5 percent while the Thai baht added 0.4 percent to touch a seven-month peak. The Chinese yuan strengthened as much as 0.5 percent for its best levels since July 2018 in breaching the key 6.8 per dollar level, despite data showing the nation's producer prices in December rose at their slowest pace since September 2016.
"The yuan will be supported by both a likely promise by China to shrink the bilateral trade imbalance, and also the expansion of domestic Chinese demand on account of expansionary fiscal and monetary policy easing," said Julian Wee, a Singapore-based Investment Strategist at Credit Suisse. The Indian rupee shed 0.2 percent as the currency of the world's sixth largest economy felt the pressure from rising oil prices and domestic political factors.
The rupee, the worst regional performer in 2018, has depreciated about a percent so far this year to lead decliners among its peers. "The rupee is expected to come under pressure as crude prices are rising. The upcoming federal budget is expected to be populist after the ruling party's defeat in the state elections last month. This might put pressure on the fiscal arithmetic," said Rushabh Maru, research analyst at Anand Rathi Shares and Stock Brokers.
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