Asian currencies were little changed on Monday, even as the yen weakened against the dollar, supported by growing calls from US officials for China to let the yuan appreciate further.
The Indian rupee bucked the trend, falling more than half a percent to a 10-month low of 44.635 per dollar on growing concerns that foreign inflows to its stock market may not be enough to offset a growing trade deficit.
With Japan, Taiwan and the United States closed for holidays, regional currencies were supported by a comment on Friday by US Treasury Secretary John Snow, who said that China needs to act "soon" to let its currency become more flexible.
Snow said he would convey that message when he meets Chinese officials during an Asian tour that will take him to Beijing and Shanghai for the Group of 20 nations meeting this week. US Federal Reserve Chairman Alan Greenspan is also scheduled to accompany Snow during the meetings with Chinese officials.
"With pressure still on China for more adjustments on the renminbi (yuan), notwithstanding broad US dollar moves, these events are likely to keep US dollar/Asia a little weakish this week," United Overseas Bank said in a report.
The speculation that China may partially accede to the US demand has pushed the premium on the yuan in non-deliverable forward contracts higher over the past week.
The one-year contract priced the yuan at 7.7770 per dollar on Monday, compared with 7.7900 on Friday. The one-year yuan NDF has strengthened from 7.8370 a week earlier.
The one-month contract priced the Chinese currency at 8.0650 per dollar, compared with 8.0700 on Friday and 8.0800 a week ago.
IDEAGlobal said in a note the three-month NDFs could gain to 8.0100 per dollar in the coming days, from 8.0230 on Monday.
US Treasury Under-secretary Timothy Adams told reporters on Friday the discussions between US and Chinese officials would influence whether the US administration branded China as a currency manipulator in a November report to Congress.
"People are speculating that they may put pressure on China during the G20 meeting," said a Singapore currency dealer.
"That's partly helping support the Asian currencies."
The yuan's spot exchange rate ended at 8.0864 per dollar, its strongest level since the currency was revalued on July 21. The currency has gained 0.29 percent since China revalued it by 2.1 percent to 8.11 per dollar.
The Thai baht and the Philippine peso traded at their strongest level in almost two months, with the baht poised to hit a four-month high on optimism that a government infrastructure spending plan would help revive the economy and bring back foreign investors to its stock markets.
The South Korean won recovered from early losses to close local trading steady at 1,037.9 per dollar, ahead central bank policy meeting on Tuesday. Economists expect the benchmark interest rate will be raised by a quarter percentage point from a record low of 3.25 percent.
The won has weakened 2.3 percent in the past two months as foreign investors sold local shares. Foreigners have been net sellers of South Korean shares in each of the past 12 sessions.
The Singapore dollar was supported by expectations the Monetary Authority of Singapore will maintain its appreciation bias for the currency at Tuesday's policy review.
Preliminary data on Monday showed gross domestic product for the island rose at an annualised rate of 3.2 percent in the third quarter.
"Our economists believe the present growth momentum will make the MAS keep its present policy of looking for a gradual appreciation of the Singapore dollar against its target trade-weighted basket, if not move to a more aggressive tightening," UBS said in a report.
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