Dollar retreat supports Asia FX; yuan turns weaker

(Oct 18): Most emerging Asian currencies rebounded on Tuesday with the dollar taking a breather, while fragile risk sentiment curbed the prospect of further upside for regional currencies.

’s yuan started the day firmer but reversed course to hit another six-year low ahead of economic data on Wednesday. Third-quarter growth in the world’s second-largest economy was seen steady at 6.7% on increased government spending and a property boom, a Reuters poll showed.

The South Korean won led regional appreciation on sustained stock inflows. The Thai baht gained as most government prices rose with foreigners adding local debt holdings.

’s ringgit rose as gains in crude prices eased concerns over the country’s oil and gas revenues.



The dollar fell against a basket of six major currencies after recently strengthening as markets priced in expectations for a Federal Reserve rate increase in December, a growing headwind for emerging markets.

Federal Reserve Vice Chairman Stanley Fischer said on Monday that economic stability could be threatened by low interest rates, but it was “not that simple” for the Fed to raise rates.

Despite the greenback’s retreat, emerging Asian currencies may not strengthen much as investors stay wary of higher US rates as well as uncertainties surrounding US elections and Britain’s exit from the European Union, analysts said.

“USD/Asia took a breather but should remain supported in coming months as uncertainties over US elections, December FOMC and Brexit linger,” said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore, referring to the Federal Open Market Committee.

WON

The won rose as foreign investors were set to become net purchasers of Seoul shares for a fourth straight session.

Concerns appeared to have been excessive over the impact on exports from Electronics Co Ltd’s Galaxy Note 7 smartphone production halt, some analysts said.

“The consumer electronics cycle is nowadays very short with new product launches happening at ever shorter cycles,” said Frederic Neumann, co-head of Asian economic research at HSBC in Hong Kong.



“In the course of about six months, any negative impact from the product cancellation will likely wear off.”

Foreign investors bought a combined net 229.1 billion won (US$202.2 million) worth of Samsung stocks over the prior three consecutive sessions, a Korea Exchange official said. That compared with total stock inflows of 515.9 billion won to the main equity market during the period, according to the exchange data.

BAHT

The baht rose as foreign investors were poised to become net buyers in the local bond market on Tuesday after the recent selling spree, Thai Bond Market Association data showed.

The Thai currency cut some of its earlier gains due to stock and bond outflows.

Investors remained concerned over political uncertainty and the risk of economic slowdown in Thailand after the death of King Bhumibol Adulyadej.

Source: The Edge Markets







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