Emerging Asian currencies crawled higher on Wednesday helped by a rally in oil prices, while investors waited to see if the US Federal Reserve would signal that it will tighten policy more gradually due to the sluggish global economy. Regional units lost some of their early gains, however, as China's stocks tumbled again after plunging on Tuesday and oil prices in Asia failed to hold overnight gains.
Still, the Malaysian ringgit rose near seven-week high, leading regional gains as the crude rebound prompted traders to unwind bearish bets on the currency of a country that is a major exporter of palm oil and liquefied natural. South Korea's won rose as exporters bought it for month-end settlements. Doubts over how fast the Fed will raise interest rates helped the won gain. Fed fund futures implied just one increase in interest rates this year.
The US central bank releases policy statement later in the day after a two-day meeting. Risky assets including emerging Asian currencies may find support if the Fed takes a dovish stance, but the impact may not last long, analysts and traders said. "The Fed can be dovish and mention that recent fall in stock markets is a downside risk. However, we don't think they will turn dovish enough in this meeting to completely rule out a March change," said Sean Yokota, head of Asia strategy for Scandinavian bank SEB in Singapore.
The ringgit rose 1 percent to 4.2485 per dollar, its strongest since December 10. The Malaysian currency found further support from demand against the neighbouring Singapore dollar. Against the city-state unit, the ringgit touched 2.9751, the highest since October 14.
That came as economists saw growing chances that Singapore will ease its policy stance to prop up growth and inflation. The won gained as Seoul shares rose nearly 1 percent with foreign stock selling seen taking a pause. The South Korean currency lost most of its earlier gains, however, as it tracked falls in China's stocks. Local importers also bought the US dollar for payments.
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