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Asian currencies rise as French vote relief boosts risk sentiment
April 25, 2017 / 5:55 AM / 8 months ago

Asian currencies rise as French vote relief boosts risk sentiment

REUTERS - Most emerging Asian currencies rose against the U.S. dollar on Tuesday as continued relief from the outcome of the first phase of French elections supported appetite for assets such as stocks and developing market foreign exchange.

A customer counts her ringgit notes outside a money changer at the central business district in Singapore August 25, 2015. REUTERS/Edgar Su/File Photo

In Asia, ringgit and rupiah moved higher after they reopened following market holidays. The ringgit was the region’s top gainer, hitting a five-month peak. The Taiwan dollar rose for a fourth session, while the Indian rupee was up 0.2 percent.

The dollar index, which measures the greenback against a basket of six major rivals, held steady at 99.141 at 0350 GMT.

“Asia FX is generally benefiting from improved risk sentiment following the results of the first round of the French elections,” said Dushyant Padmanabhan, an FX strategist at Nomura.

“That said, there are still a number of investors concerns stemming from regional geopolitical worries and existent concerns over the impact of increasing protectionist US policy,” he said.

Markets, particularly export-oriented economies such as Taiwan and South Korea, are anticipating an announcement from U.S. President Donald Trump, after his tweet last week that he would be revealing a “big tax reform and tax reduction” on Wednesday.

In a recent report, the International Monetary Fund warned that Trump’s proposed tax cuts and roll-back of financial regulations could spark a new round of financial risk-taking of the type that preceded the 2008 financial crisis.

The IMF said emerging economies could face the double threat of rising protectionism as it could reduce demand for their exports, and that U.S. inflation and faster interest rate hikes could spark capital outflows, making it harder for them to service external debt.

Stephen Innes, a senior trader at OANDA, said in a note investors are likely to feed off a supportive environment for risk assets, which markets expect to continue following the second round of French elections on May 7.

However, he added traders will need to continue to grapple with the possibility of Trump headlines, which could disrupt confidence.

MALAYSIAN RINGGIT

Chee Sing Lim of RHB Research said the ringgit is catching up with Monday’s relief rally following the French poll.

The currency was also helped by a rise in central bank reserves in mid-April.

Meanwhile, a conditional settlement deal between Malaysia’s state fund 1Malaysia Development Bhd and Abu Dhabi state fund IPIC has also boosted sentiment.

SOUTH KOREAN WON

The won reversed losses, shrugging off North Korean risks that had pressured the currency earlier.

There have been fears that North Korea could soon conduct another nuclear test or long-range missile launch in defiance of United Nations sanctions.

U.S. President Trump on Monday called for new U.N. sanctions against North Korea.

“If, despite China’s pre-emptive call for U.S. restraint, tensions escalate, gold and US treasury yields will surge, while Korean won will be sold off hard,” Mizuho Bank said in a note.

Reporting by Anusha Ravindranath in Bengaluru; Editing by Sam Holmes

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