The Malaysian ringgit and the Philippine peso eased on Thursday ahead of rate decisions by their central banks later in the day and as most of its peers continue to suffer from profit-taking along with commodities and dollar-short covering.
Emerging Asian currencies may see more corrections especially before The regional currencies enjoyed healthy gains last month with the ringgit hitting a 14-year high against the dollar as investors perceived tacit approval from the central banks as a tool against inflation, while relatively strong economic growth and ample liquidity supported.
The Indonesian rupiah is the third-best performer among emerging Asian currencies having risen 5.2 percent against the dollar so far this year. The ringgit is the No 5 with a 3.2 percent gain versus the greenback. The ringgit shed 0.4 percent against the dollar, weakening past a resistance line of 2.98 per dollar, as investors covered short positions before a rate decision and amid weak commodity prices.
The Malaysian currency may weaken further, probably to 3.00 and 3.01, the 38.2 percent and the 50 percent retracement levels of March-May strengthening trend respectively, as investors are looking to take profits more, although it may find some if the central bank raises interest rates.
With the dollar-short cover, dollar/ringgit's 14-day Relative Strength index (RSI) rose to 39.92, indicating the pair got out of an oversold territory. The peso eased on dollar-short covers and before the central bank's rate decision. But the Philippine currency is poised for a renewed gain if the central bank takes stronger steps after higher-than-expected inflation data, with some traders eyeing a more aggressive rate hike of 50 basis points (bps) or more hawkish comments.
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