SINGAPORE: The Malaysian ringgit and the Singapore dollar led declines in emerging Asian currencies on Monday on views that China may want a weaker yuan and as stronger-than-expected US job data dashed hopes for more easing by the Federal Reserve.
China's central bank fixed the yuan's mid-point against the dollar sharply weaker, its second biggest single-day fall on record, in the latest sign Beijing intends to let the currency move in a wider range.
People's Bank of China's Governor Zhou Xiaochuan said on Monday said the country needs a more flexible yuan exchange rate.
That came after data on Saturday showed China suffered its largest trade deficit last month in at least a decade.
Regional units have been supported in recent years by expectations of slow but relatively steady yuan appreciation and a weakening currency may force China's export-reliant neighbors to prevent their currencies from appreciating further.
"I won't be surprised if they widen the yuan trading band. It seems China would like to rely on FX policy to stimulate growth and that means a weak CNY," said Frances Cheung, senior strategist for Credit Agricole CIB in Hong Kong, adding a weaker yuan will put pressure on emerging Asian currencies.
"Many Asian economies would still want to avoid strong currencies for exports... The SGD could appreciate more slowly - if the MAS reduced the SGD NEER slope," she added, referring to the Monetary Authority of Singapore.
Last week, most emerging Asian currencies fell as worries about slowing growth in China and Europe prompted investors to take profits from recent gains.
They failed to find firm support from a healthier-than-expected US job data as it suggested the world's top economy may not need further monetary stimulus from the Fed.
US jobs data on Friday showed employers added more than 200,000 workers to their payrolls for a third straight month in February, a sign the economy was strengthening.
A Reuters poll after the data showed that recent signs of improvement in the US labor market were spurring economists at major Wall Street firms to rethink how aggressive the Fed needs to be in applying further monetary stimulus.
Economists still expect the US central bank to carry out another stimulus programme later this year, but the scale of the easing will be smaller than they hoped a month ago.
Some investors are still looking to buy the emerging Asian currencies on dips, expecting them to keep enjoying such policies.
PBOC's Zhou said it has "a pretty big room" to further reduce the amount of cash its commercial banks must hold as reserves with the central bank, to free up more money for lending.
"I won't add long dollar/Asia positions here, although it's risk-off in markets now. Everything is still in very tight range," said a senior dealer at a Malaysian bank.
Emerging Asian currencies have been beneficiaries of inflows amid ample liquidity boosted by major central banks in the globe.
A Reuters poll found that the Indonesian rupiah will strengthen to 8,930 per dollar by the end of the year, helped by a pickup in the global economy and foreign investments into the country.
RINGGIT
Interbank speculators covered short dollar/ringgit positions and dealers expect the pair to rise further, as market is still short on dollars. Fixing-related demand also supported.
The pair is seen heading to 3.0330-3.0350 with a down trendline between 3.0630 and 3.0400 which comes at 3.0340-3.0350.
But a Kuala Lumpur-based dealer said the pair is unlikely to rise above the level as investors are looking to sell the pair on rallies.
WON
Dollar/won rose on demand from offshore funds and short-covering, although its upside was limited by exporters.
Some investors are hoping for more bond inflows from foreign central banks after market sources in Seoul said Swiss National Bank's officials would visit South Korea this month to check the country's debt markets.
The Swiss central bank is scheduled to see institutions in South Korea in mid-March, the sources said.
"As SNB wants more information on South Korean markets, it may meet global investment banks and various local institutions to listen to market situation," said a source, asking not to be identified.
But the visit does not necessarily mean SNB will invest in South Korean bond markets, sources said.
SNB officials were not available for comment.
On Mar 8, SNB interim chief Thomas Jordan said the central bank is looking for ways to diversify its huge foreign exchange reserves, largely held in dollars and euros, but has not yet looked at the Russian rouble or South Korean won.
SINGAPORE DOLLAR
US dollar/Singapore dollar rose on short-covering and after China's weaker yuan mid-point fix.
The pair has room to rise further, probably to 1.2647-1.2654. The pair has the 76.4 percent Fibonacci retracement at 1.2647 of its February slides. The 1.2654 is the session high of March 6.
PHILIPPINE PESO
US dollar/Philippine peso rose, but gave up some of its earlier gains on remittances and bond inflows.
Some dealers also saw resistance at 42.75.
Comments
Comments are closed.