Most Asian currencies strengthened on Wednesday as the dollar fell ahead of US inflation data that could raise or lower expectations of faster rate hikes globally. The greenback fell 0.3 percent against a basket of currencies with investors on edge ahead of CPI numbers.
Headline consumer price inflation is expected to slow to an annual 1.9 percent and core inflation to 1.7 percent, an outcome that would calm investor nerves. But investors worry that the inflation figures could surprise on the high side as wages data did a couple of weeks ago, triggering a global rout in equities that weighed quite heavily on Asian currencies.
"I don't think today's moves in Asia FX are fundamentally driven, it's just investors nibbling back in short USD positions that worked in 2017 after the January correction," said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken. "(Federal Reserve Chair Jerome) Powell's comment last night alleviated concerns on Fed uncertainty, now if we get disappointing CPI today, we are back to USD weakness." In Seoul, investors pushed money into the equities market, boosting the Korean won which led the gains in the regional currencies, firming 0.6 percent to a near two-week high.
The benchmark Kospi index climbed 1 percent, supported by healthcare and technology stocks. The Indonesian rupiah strengthened 0.3 percent, while the Taiwan dollar edged higher. The Thai Baht firmed 0.4 percent ahead of a monetary policy decision from Thailand's central bank later in the day.
The Bank of Thailand is expected to leave its policy rate unchanged near record lows when it meets for its first review of the year. The Philippine peso, the worst performing Asian currency of 2018 so far, traded down 0.1 percent near an 11-1/2 year low. The Malaysian ringgit firmed 0.4 percent. Growth data released earlier in the day showed that the economy expanded 5.9 percent in the fourth quarter from a year earlier, beating expectations.
Stephen Innes, head of trading for Asia Pacific at Oanda said that the ringgit's gains were more likely due to the broader weakness in the US dollar that is permeating across the board in Asia rather than the GDP numbers. Meanwhile, Malaysia's current account surplus widened to 12.9 billion ringgit in the fourth quarter, from 12.5 billion ringgit in July-September. The Singapore dollar firmed 0.3 percent after revised figures showed that the city-state's gross domestic product grew 3.6 percent in 2017, the biggest expansion since 2014.
However, Singapore is expecting a deceleration in economic growth this year as exports slow. The Ministry of Trade and Industry said its central view is for GDP growth in 2018 to come in slightly above the middle of its forecast range of 1.5 to 3.5 percent.
The Indian rupee firmed 0.3 percent on Wednesday. Data out on Monday showed India's retail inflation eased slightly in January from a 17-month high in December but remained above the Reserve Bank of India's medium-term target of 4 percent for the third straight month. Last week, the RBI kept its main repo rate unchanged, warning that it would closely monitor inflation but also said economic growth needed to be "carefully nurtured".
Comments
Comments are closed.