Economic recovery hopes support most Asian currencies
Most emerging Asian currencies gained further ground against the dollar on Tuesday as easing coronavirus restrictions in the region fuelled hopes for a quick economic recovery from a coronavirus-induced slump.
Leading gains in the region, the Indonesian rupiah firmed 0.8% – recouping much of Monday’s losses to trade near late-February highs. The South Korean won advanced 0.6% to a near three-month peak.
With many countries across the globe beginning to unwind lockdown measures in place since March, a surprise fall in the unemployment rate in the United States last week bolstered hopes that a global recovery may be swifter than was initially expected.
The regional advances also come ahead of a two-day U.S. Federal Reserve policy meeting that starts later on Tuesday, with investors keeping an eye on the Fed’s next move.
There is not expected to be any change to interest rates, and futures pricing shows investors have abandoned expectations of rates dipping below zero next year.
Asian stock markets also advanced, with Malaysia’s stock exchange leading the pack in Southeast Asia.
The ringgit strengthened 0.2% to 4.258, with equity markets in the country surging to their highest since January after a long weekend. The country said it would reopen nearly all economic activity and allow interstate travel starting on June 10.
As risk sentiment improves and volatility in equity and currency markets decreases, investors chasing higher yields will turn their focus to catch-up trades in the developing world, said Stephen Innes, the chief global markets strategist at AxiCorp.
He singled out the ringgit as one currency that could benefit as sentiment improves across its peers.
Elsewhere, the Philippine peso dipped after the World Bank said the country’s economy will likely contract by 1.9% this year, which would mark the first decline in GDP since the Asian financial crisis in the late 1990s.
Source: Reuters (Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Aditya Soni)