SEOUL, Dec 17, 2015:
Most emerging Asian currencies edged up today as investor risk appetite returned after the US Federal Reserve raised interest rates, signalling further tightening would be gradual.
The Fed’s policy-setting committee raised the range of its benchmark interest rate by 25 basis points yesterday, the first increase in nearly a decade. It made clear the move was a tentative beginning to a “gradual” tightening cycle. Indonesia’s rupiah rose as traders covered short positions in the second-worst performing Asian currency of the year. The Thai baht gained with most government bond prices higher.
“The beat up currencies like IDR (rupiah) should do well since it’s a risk-on environment with a major risk event out of the way,” said Sean Yokota, head of Asia strategy for Scandinavian bank SEB in Singapore.
Still, analysts and traders doubted if emerging Asian currencies would appreciate further, given a weaker Chinese yuan and a rout in global oil prices.
“Asian FX strength will be capped though as you saw from CNY (yuan) fixing moving higher again. China is comfortable letting the currency weaken and that caps major strength in Asian FX despite the risk-on sentiment,” Yokota said, referring to moves in dollar/yuan.
The yuan touched its weakest level since June 2011 after China’s central bank set its daily guidance rate at a 4½-year low.
The Singapore dollar lost ground, hit by data showing the city-state’s exports in November unexpectedly fell on a decline in sales to China and Europe.