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EM ASIA FX-Asian currencies rise as Fed signals 'gradual' pace of rate hikes
March 16, 2017 / 9:46 AM / 8 months ago

EM ASIA FX-Asian currencies rise as Fed signals 'gradual' pace of rate hikes

    * Fed sounds less hawkish than many had anticipated
    * Taiwan dollar hits the highest since May 2015
    * Drop in U.S. yields bodes well for carry trade -analysts
    * Indian rupee hits highest since October 2015

 (Adds detail, updates prices)
    By Patturaja  Murugaboopathy 
    March 16 (Reuters) - Asian currencies rose on Thursday after
the U.S. Federal Reserve sounded less hawkish than many had
anticipated on the pace of further interest rate increases this
year, in a relief for risk assets worldwide.
    Investors holding long positions on Asian currencies were
also relieved after Dutch centre-right Prime Minister Mark Rutte
scored a resounding victory over anti-Islam and anti-EU Geert
Wilders in an election on Wednesday. 
    "It is all but an open invitation to buy EM, equities,
commodities as the Fed has green-lighted risk for the
foreseeable future," said Stephen Innes, senior trader at OANDA.
    The Taiwan dollar touched its highest since late
May 2015, at 30.564 per U.S. dollar, while the South Korean won
 climbed more than 1 percent. 
    The Indian rupee rose nearly half a percent on
strong equity markets and hit its highest since October 2015.
India's broader NSE share index hit a record high on
Thursday.
    China's yuan too strengthened after the central
bank raised short-term interest rates for the third time in as
many months.
    Analysts said with the Fed rate hike now out of the radar, 
investor attention will move to fundamentals of Asian economies
which are showing signs of revival.
    "This mild Fed stance will likely dispel the fear that a
stronger dollar or higher U.S. rates pose a headwind to EM,"
Citi analysts wrote in a note.
    "Instead, recent indications of a broadening and
strengthening of the EM recovery, especially in Asia's more
manufacturing-export economies, is likely to now become the
principal driver of investment decisions." 
     The 10-year U.S. Treasury yield fell after the
Fed meeting, slipping to as low as 2.486 percent on Thursday.
     Earlier this week, it rose to as high as 2.629 percent,
near a two-year high of 2.641 percent set in mid-December. 
     Some analysts said the drop in U.S. bond yields was likely
to bolster demand for higher-yielding currencies in emerging
Asian markets.     
    "We have been fairly constructive on Asian carry such as IDR
and INR. Our forecasts is for U.S. yields, especially the
10-year yields, to not move significantly higher," said Mitul
Kotecha, head of Asia macro strategy for Barclays in Singapore.
    The risk adjusted returns, as measured by the Sharpe ratio
for the Indian rupee, the South Korean won and the Taiwan
dollar, have all been over 3 percent this year, according to
Thomson Reuters' calculations.
    
    CURRENCIES VS U.S. DOLLAR
  Change at 0702 GMT                                           
  Currency                Latest bid  Previous day     Pct Move
  Japan yen            113.230              113.35        +0.11
  Sing dlr             1.404                1.4011        -0.17
  Taiwan dlr           30.668               30.840        +0.56
  Korean won           1132.000             1143.6        +1.02
  Baht                 35.023               35.054        +0.09
  Peso                 50.210                50.34        +0.26
  Rupiah               13337.000             13360        +0.17
  Rupee                65.370                65.69        +0.48
  Ringgit              4.435                 4.446        +0.25
  Yuan                 6.891                6.9135        +0.33
                                                               
  Change so far                                                
  Currency             Latest bid     End 2016         Pct Move
  Japan yen            113.230              117.07        +3.39
  Sing dlr             1.404                1.4490        +3.24
  Taiwan dlr           30.668               32.279        +5.25
  Korean won           1132.000            1207.70        +6.69
  Baht                 35.023                35.80        +2.22
  Peso                 50.210                49.72        -0.98
  Rupiah               13337.000             13470        +1.00
  Rupee                65.370                67.92        +3.90
  Ringgit              4.435                4.4845        +1.12
  Yuan                 6.891                6.9467        +0.81
 
 (Reporting by Patturaja Murugaboopathy;  Additional reporting
by Gaurav Dogra in Bengaluru and Masayuki Kitano in Singapore;
Editing by Biju Dwarakanath)
  
 
 

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