Asian currencies jump

The Malaysian rinngit, Indonesian rupiah and South Korean won all rose more than 1 percent versus the dollar on Thursday, after the US Federal Reserve halved its outlook for interest rate hikes to two by year-end. Many Asian currencies hit multi-month highs as the Fed's cautious outlook deflated the greenback.
The ringgit hit its highest level since mid-August last year, while the Singapore dollar and Thai baht both saw their strongest levels since late July.
"In the past when the dollar weakened after the Fed was dovish, the dollar weakness lasted for maybe about three to four months," said Tan Teck Leng, FX strategist for UBS chief investment office Wealth Management in Singapore.
"But is this the end of the strong dollar? We don't think so," he said, adding that the Fed could start sounding hawkish again around June and July to pave the way for a rate rise possibly in September.
The Fed kept interest rates steady on Wednesday as expected and indicated that moderate US economic growth and "strong job gains" would allow it to tighten policy this year.
The dollar came under broad pressure, however, after fresh projections by Fed policymakers showed that they expected two quarter-point hikes by the year's end, half the number seen in December.
The sharp pull-back in the greenback is "taking out a lot of dollar bulls" and triggering a lot of position squaring, said Philip Wee, senior currency economist for DBS Bank.
Wee also said dollar strength could return in coming months, if, for example, market concerns about the risk of Britain leaving the European Union intensify and trigger broad risk aversion.
"I'm still wary that things can change very quickly."
A slim majority of economists polled by Reuters poll expect Indonesia's central bank to cut its benchmark interest rate for the third time this year later on Thursday.
A rate cut seems even more likely given the dollar's fall after the Fed meeting, said UBS chief investment office's Tan.
"Essentially the Fed has given them a window to cut without really hurting the currency," Tan said, referring to the rupiah.
BI may also be willing to ease policy since Indonesian officials seem to have some concerns about the rupiah's recent rise, Tan said.
Earlier this month, Indonesia's chief economics minister said he does not want the rupiah too strong above its fundamental value after the currency gained more than 2 percent in two weeks.