Most emerging Asian currencies retreated on Thursday as doubts surfaced over Opec's agreement to curb oil production and as investors stayed wary of adding bullish bets ahead of the US presidential election. Regional currencies initially rose, led by the Malaysian ringgit, as crude prices jumped after the Organisation of the Petroleum Exporting Countries agreed to limit its production in talks held on the sidelines of an energy conference in Algeria.
But most of the currencies lost upward momentum as oil prices retreated on growing scepticism over how the oil cartel would implement a plan to curb output. Uncertainties over the US elections in November also weighed on sentiment. "Into the November election, EM Asia FX strength will be limited," said Sean Yokota, head of Asia strategy at Scandinavian bank SEB in Singapore.
"Much of the positive carry has been eroded and you don't get paid to be long Asia. And every debate provides event risk, which can be negative for risk sentiment," Yokota said. Before the first debate between US Democrat presidential candidate Hillary Clinton and Republican Donald Trump, most emerging Asian currencies had slid on Monday. Regional currencies rebounded on Tuesday as Clinton was seen beating Trump in the debate. The Republican is viewed as negative for emerging Asian countries, being perceived as more protectionist on international trade.
The ringgit rose as much as 4.1000 per dollar, its strongest since September 22, as traders cut bearish bets on the oil rebound. The Malaysian currency closely tracks crude prices due to the country's reliance on oil and gas exports. The ringgit pared some of its earlier gains due to a lack of detail on the Opec agreement. "Oil should stay supportive short term, but until there is a convincing break above $50 per barrel, the USD/MYR will continue to be supported on dips," said Stephen Innes, senior FX trader for FX broker OANDA in Singapore. Brent crude eased to$48.61 a barrel in early afternoon trade in Asia.
The ringgit is also seen having chart resistance around the session high, said a senior Malaysian bank trader in Kuala Lumpur. The currency has been closing daily sessions weaker than the level since September 13. The Taiwan dollar advanced as local shares rose more than 0.8 percent and on demand from foreign financial institutions.
Exporters also bought the island's currency for quarter-end settlements. Oil importers, however, purchased the US dollar around 31.200 for payments, limiting the Taiwan dollar's upside, traders said. Investors were awaiting the central bank's monetary policy meeting later in the day. The authority is predicted to refrain from cutting interest rates, as it expects economic prospects to improve for the trade-dependent economy.
The won earlier appreciated as much as 0.5 percent to 1,091.6 per dollar, its strongest since September 8. The South Korean currency quickly cut gains and turned weaker as oil importers rushed to buy the greenback for payments. Caution also grew over possible intervention by the foreign exchange authorities to stem further gains in the best-performing emerging Asian currency.