The Malaysian ringgit hit a record high against the US dollar, leading gains in other Asian currencies on Wednesday, after solid US economic data triggered an increase in demand for riskier assets. The Indonesian rupiah and the Thai baht also gained but continued to underperform their peers as investors remained unconvinced that authorities in those countries have a handle on inflation.
Indonesia's central bank holds a rate-setting meeting on Friday. "The BI decision will be closely watched," said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong, adding the investment bank does not expect a rate increase from Bank Indonesia this week.
"The IDR rate curve is very steep at the front end pricing in a near-term hike. if BI fails to hike then another wave of capital outflows cannot be ruled out," said Cheung. A slim majority of economists polled by Reuters expect the central bank to leave rates at a record low of 6.5 percent. But a pick-up in annual inflation to a 21-month high in January prompted some economists to predict a 25-basis point increase at the meeting.
Trading was relatively light as some markets including China, South Korea and Taiwan were closed for the Lunar New Year holidays. Dollar/ringgit dropped below 3.05 and hit a record low amid a broader improvement in risk appetite that also knocked US dollar/Singapore dollar to an all-time low overnight.
Trading is expected to slow down in the afternoon due to holidays abroad, so people who want to go short have probably done so already. Dollar/ringgit slid to low of 3.0390, compared with its Monday's close of 3.0600. The central bank was spotted buying dollars to check the pair's falls, dealers said. Malaysia markets were closed on Tuesday for a public holiday.
"I feel like the landscape has changed during the last two days. Now it's 'risk on' and everything is bought against the dollar," said a Kuala Lumpur-based dealer. Trendline support for dollar/ringgit comes in around 3.0070. The ringgit has risen 1.3 pct so far this year, the No 3 performer among emerging Asian currencies after Taiwan dollar and the South Korean won.
The Philippine peso's rise has taken it beyond a trend line at 44.0600 per dollar, paving the way for a move to 43.85. Dollar/peso at 43.985, compared with its previous close of 44.215. The pair is now heading to 43.85, the previous low that the dollar/peso hit on January 13. Local companies and currency investors appeared to buy dollar a few days ago but they are reversing the move, a Manila-based dealer says
The Thai baht and the Indonesian rupiah gained, helped by a broader improvement in risk taking and higher domestic equities. Inflation fears persist, though. "Worries about inflation should ease a bit globally but not much as commodity prices should rise sharply this year," said a Bangkok-based dealer.