The Malaysian ringgit led a broad Asia currency rally on Friday amid optimism about the global economy, while the Singapore dollar rose as investors moved to cut their long US dollar holdings. Some analysts attributed the firmness in Asian currencies to tentative signs that foreigners may start buying Asian assets.
Foreigners bought $2 billion in Korean shares in the four weeks ended April 19, following by the purchase of $1.3 billion in Taiwan shares and $929 million in Indian shares, according to Nomura.
SINGAPORE DOLLAR: The Singapore dollar gained 0.4 percent to 1.4937 per US dollar - its highest since February 10 - as investors cut long US dollar holdings to limit losses amid signs that some foreign money was flowing into the country. "The break of 1.5000 triggered some stops," said a Singapore-based dealer.
A second dealer said those who were long on the US dollar had cut positions at 1.4940-50. The market remained bearish on the Singapore dollar in the short term after the central bank lowered the centre of the currency's trade-weighted band this month.
"The entire G7 bloc is under pressure for various reasons. No one is looking healthy and therefore smart money is moving into emerging market currencies where the economies are better run, and Singapore may be seen as one," said Woon Khien Chia, strategist at Royal Bank of Scotland. "Still I don't want to be long Singapore dollar per se," she added.
RINGGIT The Malaysian ringgit gained 0.8 percent to 3.59 to the dollar, a one-week high, as local stocks firmed while the dollar struggled following a slide against the euro a day earlier. "Overall risk appetite is up," said a trader in Kuala Lumpur.
Three-month dollar/ringgit non-deliverable forwards eased to 3.599, implying a 0.3 percent ringgit fall from the spot. The spread has narrowed from 0.5 percent on Monday.
"The market expects inflow of funds once financial liberalisation policies are announced next week and the interest rate spreads versus dollar is narrowing," said CIMB analyst Suresh Ramanathan. The central bank is expected to cut its policy rate by 25 basis points next week to 1.75 percent to support the slowing economy, while the US rate is near zero.