BENGALURU: Asian currencies weakened across the board today following gains by the dollar on better-than-expected US data, with the ringgit the biggest loser after central bank comments seen as signalling a dovish tilt.
Robust US economic data, on service industries and new home sales, saw the dollar index gain for a fifth straight session overnight and hover around two-week highs.
The ringgit slid 0.3% to its weakest level in more than two weeks, after investors weighed commentary by Bank Negara Malaysia after its Tuesday policy meeting, where it kept interest rates unchanged as expected.
The central bank outlined risks from unresolved trade tensions, heightened uncertainties on the global and domestic fronts and weakness in commodity-related sectors.
The Philippine peso was little changed at 52.250, following a sharp fall on Tuesday after the announcement of February inflation falling back into the central bank’s target range sparked speculation of policy easing.
Today, incoming Philippine central bank governor Benjamin Diokno said inflation could fall to 2% – the bottom of its target range – as early as the third quarter, supporting the view of many economists that a rate cut could come later this year.
“With the price goal seemingly in hand, it may be time for the BSP to consider the possibility of reducing the reserve requirement ratio in the near term, and eventually lower policy rates to help chase the 7-8% growth target,” ING’s Nicholas Mapa said in a note.
Elsewhere, the Thai baht and Indonesia’s rupiah both weakened 0.2%.
Renewed worries over tensions on the Korean Peninsula weighed on the won, which fell 0.3% to 1,128.9, with some traders saying tensions forced some yuan investors cover their short positions in the greenback.
The yuan, the region’s strongest performer this year, slipped 0.1% to 6.715 per dollar. Investors have regained some of their lost appetite for a currency that shed nearly 6% against the dollar in 2018.
The yuan is expected to trade around current levels in the next year, a Reuters poll showed, on the prospect of an end to the trade war with the United States.
Optimism about a trade deal getting done is largely priced into the yuan-dollar rate already, though there may be a boost for the Chinese currency once a pact is signed, said Stephen Chiu, an FX and rates strategist at China Construction Bank Asia Corp.
On Tuesday, a pledge by China’s state planner to increase the flexibility of the yuan’s exchange rate set off market speculation that a tweak to official wording could mean changes to the country’s tightly managed currency regime.
Source: The Sun Daily