The baht was the best-performing Asian currency this week, rising on the back of the Thailand’s military junta vow to boost spending to revive economic growth, while the rupiah led losses after Indonesia reported a surprise trade deficit.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, was steady for the week, erasing a decline after the European Central Bank (ECB) cut interest rates to negative on Thursday, potentially spurring fund flows to emerging market assets.
After the rates announcement, the euro rose against the greenback and the MSCI Asia Pacific Index of shares on Friday closed at its highest level since October last year.
In Bangkok, the baht appreciated 0.9 percent this week — the most since February — to reach 32.558 per US dollar, data compiled by Bloomberg show. The rise was driven by the promise of the Thai military administration, which took power in a May 22 coup, to step up infrastructure development and increase investment in areas adjacent to the nation’s borders.
“The perception is that the new Thailand government has provided stability and improved conditions for growth,” Credit Agricole CIB strategist Dariusz Kowalczyk said, adding that the ECB’s stimulus is “positive for high-yielding currencies such as those in Asia.”
Foreign funds pumped US$521 million into Thai stocks and local currency sovereign bonds last week, exchange data show.
In Taipei, the New Taiwan dollar retreated 0.1 percent this week after the greenback fell against its local counterpart on Friday, shedding NT$0.008 to close at NT$30.080 after the People’s Bank of China raised the reference rate for the yuan in exchange for the US currency, dealers said.
While the central bank stepped in to help the US dollar recoup most of its earlier losses, turnover in the foreign exchange market remained moderate on Friday as many traders stayed on the sidelines while waiting for the US’ jobs report for last month, they added.
The Chinese central bank’s move boosted the yuan’s value on market speculation that Beijing is willing to loosen its grip on the Chinese currency’s upward movement, the dealers said, adding that the higher yuan served as a catalyst to boost the strength of other regional currencies in Friday’s session.
In addition, the ECB’s cutting of its deposit rate to negative territory encouraged banks in the eurozone to extend their lending, which will lead to more funds flowing out of Europe to Asia and lifting regional currencies, the dealers said.
“In the short term, the US dollar may weaken, so Taiwan’s dollar may rise a little next week,” Fubon Commercial Bank (台北富邦銀行) economist Cindy Yu (尤敏君) said. “Looser liquidity in Europe also boosted US and Asian equities, which is good for Asian currencies.”
In Manila, the peso rose 0.2 percent to 43.65 this week. Inflation in the Philippines accelerated to 4.5 percent last month, the fastest since 2011 and exceeding the median forecast of economists surveyed by Bloomberg for a rate of 4.2 percent, data showed on Thursday. That spurred speculation that Bangko Sentral ng Pilipinas will raise borrowing costs at its June 19 meeting.
In Jakarta, the rupiah posted its third weekly drop, falling 1.4 percent to 11,835, after Indonesian authorities reported a US$1.96 billion trade deficit in April, the biggest shortfall in nine months.
Indonesia’s current account gap may almost double this quarter from the previous period, Bank Indonesia Governor Agus Martowardojo said on Thursday from Jakarta.
“Our view is for more rupiah weakness against the [US] dollar,” said Mika Martumpal, treasury research and strategy head at PT Bank CIMB Niaga.
Elsewhere in Asia, Malaysia’s ringgit ended steady at 3.2122, India’s rupee slipped 0.1 percent this week to 59.1825 per US dollar, the yuan fell 0.1 percent to 6.250, the dong dropped 0.1 percent to 21,185 and in South Korea, the won was little changed at 1,020.41, with financial markets in the country closed on Friday for a public holiday.
Meanwhile, the euro jumped the most in three months against the greenback in one of the week’s sessions over the ECB rate changes.
The US currency gained against a basket of peers as an employment report matched forecasts, bolstering speculation that the US Federal Reserve will keep reducing stimulus.
The euro fell 0.5 percent versus the dollar on Thursday — the most since March 6 — and finished the week little changed at US$1.3643 in New York. The yen fell 0.7 percent this week to ￥102.48 per US dollar to post its biggest loss since the five days ended on April 18, while falling 0.8 percent to ￥139.80 per euro.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, rose 0.2 percent to 1,012.80 this week.
As the threat of deflation prompted the ECB to expand stimulus, the growing British economy spurred bets that the Bank of England will hasten plans to raise rates.
The Bank of England’s Monetary Policy Committee in London left the benchmark interest rate at 0.5 percent on Thursday, while keeping asset purchases under the quantitative easing program at ￡375 billion (US$630.2 billion).
The pound rose 0.2 percent this week to ￡0.8121 per euro and gained 0.2 percent to US$1.6793.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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