Most emerging Asian currencies edged higher on Monday ahead of a US-North Korea summit that might ease regional tensions, while traders also focus on key central bank meetings later this week. US President Donald Trump and North Korean leader Kim Jong Un will have an unprecedented meeting on Tuesday in Singapore, possibly laying the groundwork for ending a nuclear stand-off between the old foes.
The South Korean won and the Indian rupee both about a quarter percent each, while the Singapore dollar and Thai baht also advanced. "The market is probably a bit too positive, thinking everything will go great," said Stephen Innes, head of Asia-Pacific trading for Oanda in Singapore, referring to the US-North Korea summit.
"Risk-on environment is driving the currency markets in Asia." However, analysts expect regional currencies to trade more cautiously with a raft of major central bank policy meetings coming by Friday.
The Federal Reserve is expected to hike its interest rates for the second time this year at its policy meeting on Tuesday and Wednesday. Some analysts also believe the Fed will hint at raising rates a total of four times during 2018. The European Central bank meets on Thursday 14, when it could signal intentions to start unwinding its massive bond purchasing programme.
Last week, the ECB's chief economist said the central bank will debate whether to end bond purchases later this year, a hawkish message which hit emerging markets. Andy Ji, currency strategist at Commonwealth Bank of Australia in Singapore, expects Asian currencies "to end the week lower on tweaks to the ECB's forward guidance".
Regional currencies' reaction to Trump's backing out of a joint Group of Seven communique over the weekend, was relatively muted on Monday. The Philippine peso was the biggest loser as concerns over its current account deficit continue to hurt the currency.
On Friday, the Philippine statistics agency said the trade deficit widened to a four-month high in April on robust imports of capital and consumer goods and as weak demand overseas dented exports.
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