The Malaysian ringgit and Philippine peso rose on Wednesday to lead Asian currencies higher as investors were encouraged by signs of recovery in the US economy despite worries about the risk from the swine flu.
Most Asian currencies firmed ahead of US GDP data and the Federal Reserve's policy decision later on Wednesday, following US figures that showed consumer confidence posted its biggest jump in three years in April.
PESO
The Philippine peso gained almost 0.8 percent to 48.63 per dollar while dollar/peso non-deliverable forwards curve moved lower. "The peso rose on overall risk appetite from positive overnight data," said a Manila-based dealer. One-year offshore dollar/peso NDFs fell to 50.25, implying a 3 percent fall in the peso from the spot. Meanwhile, one-year onshore dollar/peso forwards hovered near 49.73, implying a 1 percent premium over the NDF.
However, the offshore/onshore forwards spread has narrowed since late March as the offshore market lifted some bearish peso bets on signs the financial crisis was stabilising. "Only risk aversion or dissipation of risk dictates market moves," the peso dealer said.
RINGGIT
The Malaysian ringgit jumped 0.8 percent to 3.595 per dollar as risk aversion eased after US consumer confidence data. "Risk appetite is back," said a Kuala Lumpur-based trader, who expects ringgit to trade between 3.6-3.64 near term. The ringgit was still down 1 percent in the past week due to risk aversion fuelled by concerns about the economic fallout from the swine flu and the heath of US banks.
One-year NDFs priced in a 0.4 percent ringgit fall from the spot compared to zero on Tuesday. The implied depreciation has dropped from 2 percent in early March. The central bank announces a policy review later on Wednesday, and expectations range from a steady-rates outcome to a 25-basis-point rate cut. "Any cut should be viewed as positive for ringgit," the trader said.