Emerging Asian currencies appreciated across the board on Tuesday, with the Thai baht firming most in a week, as the US dollar slipped to a two-month low after Federal Reserve officials signalled the tightening cycle was nearing its end.
The baht appreciated as much as 0.7% to 34.870 per dollar, its best intraday gain in a week. The South Korean won traded 1.1% stronger against the dollar, marking its best gain in nearly a month.
Analysts at Maybank said momentum indicated more downside for the USD-THB pair.
“There is a possibility the pair can move further downwards near term but that would be subject to a stable political outcome and favourable US CPI reading,” they said.
The dollar index lost ground, trading at its lowest since mid-May after Fed officials signalled that while additional rate increases were needed to bring down inflation, an end to the central bank’s tightening cycle was getting close.
“A pause might be taken as positive but it’s not happening this month,” said Michael Every, Global Strategist at Rabobank.
Markets are awaiting US inflation data due on Wednesday to see if price pressures are continuing to moderate, which could provide clues on the interest rate outlook.
Asian currencies tepid as Fed’s rate-hike talk boosts dollar
Elsewhere, the Indonesian rupiah and the Singaporean dollar added between 0.1% and 0.2%, while the Philippine peso jumped by up to 0.5%.
The Japanese yen was trading at 140.72 per dollar, its highest since June 16, drawing support from a slump in US Treasury yields.
Meanwhile, China’s central bank extended some policies to shore up the property sector, with supports for the sector failing to gain traction and markets expecting more stimulus soon.
“China’s current real estate sector is a bubble waiting to be burst, and perhaps against a backdrop of China’s reopening leaving much to be desired, an extension of the reprieve provided to real estate developers is a necessary evil,” Maybank wrote.
“We look to the Politburo meeting towards the end of month for other possible stimulus measures to be announced.”
Equities in the region were also upbeat, with those in Taiwan and South Korea soaring more than 1.4%.
Stocks in Indonesia climbed 0.6%, and those in Thailand and the Philippines added 0.4%.
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