Most Asian currencies edged higher against the dollar on Thursday, with the rupiah touching a four-week high after Moody's Investors Service upgraded Indonesia's credit rating outlook to "positive" from "stable". Earlier in the session, the rupiah touched 13,280 per dollar, its strongest level since January 12. It ended 0.1 percent higher at 13,310.
The outlook upgrade by Moody's late on Wednesday follows a similar move by Fitch in December. "On a standalone basis, the shift in Moody's outlook may not be of much impact given that they already have Indonesia's credit rated above investment grade," analysts at Citi said in a research note.
"Some investors may see this as increasing the probability of a rating upgrade by S&P... That may encourage better sentiment," the analysts added. S&P is the only major global ratings agency that still rates debt of Southeast Asia's largest economy below investment grade, but analysts think it may soon join in. Some major institutional investors require investment grade ratings from all three agencies to buy a country's debt.
Most other Asian currencies edged higher against the dollar. China's yuan firmed against the dollar as sliding US bond yields weighed on the greenback, although traders said talk of further falls in the Chinese currency may intensify over the short term.
The South Korean won also eked out gains, although it traded in a narrow range as investors took a cautious stance ahead of a meeting between US President Donald Trump and Japan's Prime Minister Shinzo Abe coming up on Friday. Friday's summit between Trump and Abe could have a significant influence on Japan's yen, sending ripples to other Asian currencies such as the won.
Overall, market participants seem cautious toward buying the dollar at this point as they seek further details on Trump's pro-growth fiscal policies, said Stephen Innes, senior trader for FX broker OANDA in Singapore. In the meantime, investors seem to be putting money back into Asian assets, he said. "Investors can't just sit back and wait," Innes added.
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