SINGAPORE: Most emerging Asian currencies eased on Monday amid caution ahead of the U.S. Federal Reserve’s policy meeting, while weak commodity prices sent the Malaysian ringgit and the Indonesian rupiah to 17-year lows.
Thailand’s baht bucked the regional trend as traders cut their bearish bets with the currency holding from falling past a support level. Singapore’s dollar also gained on demand against the neighbouring ringgit.
The U.S. dollar eased against a basket of six major currencies after a drop in American stock and bond yields.
The greenback’s retreat did not support emerging Asian currencies much as investors were focusing on the monetary policy divergence between the United States and the region.
The Fed is unlikely to raise interest rates on its two-day policy meeting starting from Tuesday, but investors were looking for any clues for the timing of a hike.
“There is still a possibility for some language tweak especially in outlook, coupled with the GDP data,” said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore, referring to U.S. second quarter gross domestic product data due on Thursday.
“The market can still price a steeper rate path, which is why we expect USD/Asia to stay very supported.” Staff economists at the Fed expect a quarter-point U.S. interest rate increase this year, according to forecasts the Fed mistakenly published on its website.
The ringgit eased 0.1 percent to 3.8140 per dollar, its weakest since September 1998, as weak commodity prices added to concerns over Malaysia’s sluggish exports. The Malaysian currency was pegged at 3.8000 between 1998 and 2005.
The central bank was spotted in the market trying to limit further losses in the worst-performing Asian currency so far this year, traders said.
Malaysia’s international reserves fell to $100.5 billion as of July 15 from $105.5 billion as of June 30, central bank data showed on July 23.
“If reserves fall toward USD90 billion, the market may start questioning BNM’s ability to cap spot and concerns over reserve adequacy could start to surface,” Societe Generale said in a research note, referring to Bank Negara Malaysia, the central bank.
“If EM FX remains under pressure, BNM might be forced to let the MYR depreciate well beyond the 3.80 level.”
BAHT The baht rose as traders covered short positions after the currency held from falling past psychological support at 35.00 per dollar.
On Friday, the Thai currency hit 34.95, its weakest since May 2009. Exporters earlier on Monday bought it for month-end settlements on dips, but corporate demand was not that strong, traders said.
The baht pared some of its earlier gains as customs-cleared data showed exports in June fell 7.87 percent from a year earlier, missing a 5.00 percent drop forecast in a Reuters poll.
The Singapore dollar found more support from month-end commercial demand.
Traders also covered short positions in the city-state’s currency as it has a chart support at 1.3752 against the U.S. dollar, the 76.4 percent Fibonacci retracement of its appreciation from March to April, analysts said.
The Singapore dollar briefly weakened past the level on Friday, but returned to even firmer ground than that support.
WON The won lost as much as 0.5 percent to 1,173.8 per dollar at one point, its weakest since June 2012. Seoul shares fell as foreign investors were set to become net sellers for a seventh consecutive session.
The South Korean currency turned firmer as the U.S. dollar’s weakness prompted stop-loss selling of the greenback. Exporters also bought it for month-end settlements. – Reuters