The South Korean won and the Philippine peso led Asian gains against the dollar on Thursday, but traders were cautious ahead of a gathering of global central bankers in Jackson Hole, Wyoming. Analysts said President Donald Trump's threat on Wednesday to shut down the US government and possibly pull out of the North American Free Trade Agreement (NAFTA) also put investors on edge.
"Asian currencies are in range trade today. They are susceptible to external uncertainty such as US political turmoil, the US debt ceiling and are awaiting the Jackson Hole symposium," said Qi Gao, Asia FX Strategist at Scotiabank. The won's gains were due largely to easing tensions over North Korea, while the peso was likely correcting after recent heavy selling, he added.
However, worries over North Korea will linger, he said. Friday marks the one-year anniversary of the North's successful submarine-launched ballistic missile test. Both the won and peso rose more than a quarter of a percent each. The peso, which had been plumbing 11-year lows, firmed for the third straight day after the central bank warned traders that it would intervene in the currency market to curb any speculative activity on Monday.
Trump's remarks came ahead of a looming debate in Congress over raising the debt ceiling. "During the last two episodes of a debt ceiling crisis in July 2011 and October 2013, AXJ currencies strengthened against the USD as investors sold off US assets, but weakened after the crisis was averted," said Bank of Tokyo-Mitsubishi UFJ said in a research note "We think that a similar scenario may happen this time, assuming that a government shutdown is averted and the debt ceiling is raised."
Investors are awaiting speeches from Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi at the Jackson Hole symposium on Friday. While both Yellen and Draghi are not expected to be deliver any fresh policy messages in the conference, investors were wary of any signals that could affect regional currencies. Thai baht was up 0.09 percent against the dollar on Thursday.
Leading the regional gains this year, some analysts said the baht is overvalued given recent signs its export recovery may be losing momentum. Thailand's customs-cleared annual exports rose for a fifth straight month in July, but fell short of expectations leading to the country's first trade deficit in more than two years. "Thailand's growth has been disappointing. And inflation is lowest among the Asian economies. The economy is screaming for increase in policy accommodation." said Prakash Sakpal, an economist at ING in Singapore in a note. "We expect the Bank of Thailand will be the next Asian central bank to ease monetary policy after Bank Indonesia and the Reserve Bank of India."