The Malaysian ringgit and Philippine peso fell on Tuesday, undermined by the dollar's broad strength amid expectations of a stronger growth outlook for the world's largest economy. The dollar hit a two-month high against the yen and kept up the pressure on the euro, as year-end unwinding of short positions supported it along with higher Treasury yields.
The prospect of low US interest rates has weighed on the dollar this year, making it attractive as a funding currency for carry trade. But improving US data has fanned expectations that the Federal Reserve might start to tighten policy sooner than previous thought.
RINGGIT The ringgit eased 0.3 percent to 3.442 per dollar, its lowest level since October 29. The ringgit has shed nearly 2 percent in the past month due to the dollar's broad resurgence, particularly against the euro, against which the ringgit is closely correlated.
Charts point to a ringgit decline towards 3.45 after it fell below its 100-day moving average at 3.4405 this week, although it may get some near-term support after it breached the upper end of the Bollinger band, indicating it is oversold. Longer term, the ringgit may continue to suffer if the dollar's global strength persists, but it would need a strong catalyst to test 3.47, or the 50 percent retracement of the ringgit's 3-month rise from mid-July.
PESO The peso shed a fifth of a percent to 46.75 per dollar but later recovered to 46.62 on expectations of fresh remittance inflows ahead of the Christmas and New Year holidays. Still, some traders expect the peso to test 46.80, its lowest level this month, in the near-term if the euro falls to $1.42-1.4150. One-month dollar/peso NDFs rose to 46.82 in thin trade, implying a 0.3 percent fall for the peso from its spot rate. Meanwhile, 1-month onshore forwards edged up to 46.813. So the NDFs were virtually at par with onshore forwards.
BAHT The baht eased a tad in lacklustre trade, tracking weaker major currencies against a broadly bullish dollar. "Baht follows majors which are softer against the dollar. With the market in a clear holiday mood, baht is not going to move out of the small 33.10-33.30 range between now and the New Year," a Bangkok-based trader said. The baht has traded in a range of 33.18-33.30 per dollar so far on Tuesday and was bid at 33.24, down slightly from 33.22 late on Monday.