TOKYO: Asian currencies rose broadly against the dollar on Thursday after a rise in global equities pointed to an easing in risk reduction by investors, with the Malaysian ringgit rebounding further following a steep drop earlier this month.
The Singapore dollar edged higher, helped by the signs of improvement in risk appetite as well as an upgrade to Singapore's forecast for 2011 economic growth.
The Malaysian ringgit, one of the emerging Asian currencies that has been heavily hit during the dollar's short-covering rally seen so far this month, pulled further away from a two-month low hit the previous day.
‘The broad move you're seeing in Asia...I think really does reflect markets starting to look a little more calm,’ said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong.
‘It's an easing in negative risk tone in the market,’ Tihanyi said, adding that such signs were evident in a rebound in global equities.
MSCI's global equities index held steady on Thursday, clinging to gains made the previous day, when it rose 0.9 percent for its first rise in six trading sessions.
Emerging Asian currencies have risen in recent months on the back of strong economic growth and rising interest rates. But they have suffered a pullback in May as investors booked profits and covered their bets against the US dollar.
Scotia Capital's Tihanyi said he expected the dollar to come back under pressure against emerging Asian currencies in coming months. By the end of the year, the dollar will probably drop to 2.89 against the Malaysian ringgit and fall to 1,060 versus the South Korean won.
MALAYSIAN RINGGIT
The dollar dipped 0.2 percent against the Malaysian ringgit to 3.0245, pulling away from a two-month high of 3.0470 hit the previous day.
The dollar earlier fell as low as 3.0125. Its drop stalled right near support at 3.0134, the 38.2 percent retracement of its rally from a late April trough of 2.9590 up to Wednesday's two-month peak.
The dollar also has support against the ringgit at 3.0115 and 3.0110, a couple of intraday lows hit in April.
The ringgit is seen likely to head higher in coming months, helped by market expectations for Malaysia's central bank to raise interest rates further, with analysts bracing for Bank Negara (BNM) to raise rates as early as July after a 25 basis point hike to 3.0 percent earlier in May.
‘Given strong domestic demand, we continue to see BNM lifting rates by another 50 bps to 3.50 percent by year-end, provided growth picks up,’ Charlie Lay, analyst for Commerzbank in Singapore, said in a research note.
Malaysia's central bank is likely to raise rates at its next meeting in July and Commerzbank sees the ringgit rising to 2.85 to the dollar by year-end, Lay added.
Data the previous day showed Malaysia's gross domestic product rose 4.6 percent in the first quarter from a year earlier, just shy of market expectations, while the consumer price index rose 3.2 percent in April from a year ago, a tad faster than the market had expected.
SINGAPORE DOLLAR
The Singapore dollar edged higher after Singapore revised up its 2011 forecast range GDP growth to 5-7 percent from the previous forecast of 4-6 percent.
But some market players said reaction to the revised forecast was relatively subdued. The move higher in the Singapore dollar was more of a risk-on play, said a trader for a European bank.
Singapore also said its economy grew 22.5 percent in the first quarter on an annualised basis, below the advance estimates of 23.5 percent, but broadly in line with market expectations.
The dollar fell to as low as 1.2364 against the Singapore dollar, but later pared its losses to stand at 1.2385 down 0.1 percent on the day.
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