March 13, 2017 / 4:27 AM / 7 months ago

EM ASIA FX-Asian currencies gain some respite, focus on pace of Fed rate rises

    * Asian currencies edge higher vs U.S. dollar
    * U.S. jobs data was solid, but not as strong as some
expected
    * Rupee 1-mth NDFs up 0.5 pct after ruling party's election
win

 (Adds text, updates prices)
    By Masayuki Kitano
    March 13 (Reuters) - Asian currencies edged higher on Monday
as the dollar lost some of its shine as weak U.S. wage growth
tempered expectations for a spate of interest rate increases.
    The moves in Asian currencies were cautious, however, ahead
of a U.S. Federal Reserve meeting on March 14-15, at which the
Fed is widely expected to raise interest rates.
    Investors' focus is now turning to how many more rate rises
may be coming this year. 
    The South Korean won rose about 1 percent to
1146.4, pulling away from a five-week low of 1,161.2 per U.S.
dollar set on Friday. 
    The Taiwan dollar and Thai baht both rose
more than 0.3 percent.
    U.S. job data released on Friday showed that U.S. employers
added 235,000 workers in February, exceeding the 190,000 hiring
forecast among analysts polled by Reuters. 
    However, the outcome weighed on the dollar as there had been
expectations of an even stronger figure, and as the data also
showed that wages rose less than expected.

    Although the U.S. job data has led to some buying back of 
Asian currencies, they appear vulnerable against the dollar in
the near term, said Hirofumi Suzuki, an economist for Sumitomo
Mitsui Banking Corporation (SMBC) in Singapore.
    "The theme now is an acceleration of the pace of (Fed) rate
hikes this year, and the risk seems to be tilted toward the
selling of Asian currencies and dollar-buying," Suzuki said.
    One focus this week is whether Fed policymakers will revise
up their interest rate projections in their so-called "dot
plot". In the previous projections released in December, the Fed
had signalled three interest rate hikes in 2017.
    The dollar could gain a boost if the Fed revises its dot
plot higher, analysts at Maybank said in a research note.  
    "Should this shift in markets' expectation for a pick-up in
momentum on Fed rate hike trajectory continue, we expect U.S.
dollar strength to be felt more on the Asians and
commodity-linked currencies," the Maybank analysts wrote.
    Asian currencies that outperformed over the past two to
three months such as the Taiwan dollar, South Korean won,
Singapore dollar and Thai baht, against a
backdrop of low market volatility may give back some of their
earlier gains, they added.
    
    INDIAN RUPEE
    Indian shares, bonds and rupee are likely to gain when
trading resumes on Tuesday after a public holiday on Monday, as
Prime Minister Narendra Modi's landslide victory in India's
northern state of Uttar Pradesh is seen as an endorsement of his
economic reform agenda.
    On Monday, India's NSE stock futures listed on the
Singapore Exchange rose more than 2 percent. The rupee rose
about 0.5 percent to 66.34 per dollar in offshore trading of
one-month non-deliverable forwards.
    The victory by Modi's ruling Bharatiya Janata Party
(BJP)strengthens his claim to a second term in national
elections in 2019, and investors are betting it will embolden
the BJP to embark on more reforms. 
    "This is likely to renew hopes toward Modi's administration
going into 2019," said SMBC's Suzuki.
    There may be some relative value in India at a time when
emerging markets in general are likely to face headwinds from
the prospects for U.S. monetary tightening, and also since the
European Central Bank is seen getting closer to raising interest
rates than before, Suzuki said.  
    The euro hit a one-month high against the dollar on
Monday, following news that some European Central Bank
policymakers have raised the possibility of raising interest
rates before its bond buying programme ends.   
    "India will probably remain firm for some time yet, among
emerging market countries," Suzuki said.
    Indian bonds and equities attracted foreign inflows in
February, with foreign interest in Indian debt returning after
fourth months of continued selling, while Indian equities
attracted net foreign investments of $1.48 billion.

    
    CURRENCIES VS U.S. DOLLAR    
  Change on the day at   0348 GMT                     
  Currency               Latest bid   Previous     Pct
                                           day    Move
  Japan yen                  114.81     114.74   -0.06
  Sing dlr                   1.4102     1.4116   +0.10
  Taiwan dlr                 30.936     31.036   +0.32
  Korean won                1146.40    1157.40   +0.96
  Baht                        35.29      35.40   +0.31
  Peso                       50.290     50.360   +0.14
  Rupiah                      13357      13378   +0.16
  Rupee                       66.60      66.60   -0.00
  Ringgit                    4.4440     4.4490   +0.11
  Yuan                       6.9071     6.9130   +0.09
                                                      
  Change so                                           
 far in 2017                                    
  Currency               Latest bid   End prev     Pct
                                          year    Move
  Japan yen                  114.81     117.07   +1.97
  Sing dlr                   1.4102     1.4490   +2.75
  Taiwan dlr                 30.936     32.279   +4.34
  Korean won                1146.40    1207.70   +5.35
  Baht                        35.29      35.80   +1.45
  Peso                        50.29      49.72   -1.13
  Rupiah                      13357      13470   +0.85
  Rupee                       66.60      67.92   +1.98
  Ringgit                    4.4440     4.4845   +0.91
  Yuan                       6.9071     6.9467   +0.57
 * India's financial markets are closed on Monday for a public
holiday.

 (Reporting by Masayuki Kitano in Singapore; Editing by Kim
Coghill)
  
 
 

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