The won rose on Wednesday after South Korea said it would open currency markets to overseas traders, bucking the trend among other Asian currencies which were little changed as investors digested comments by the Fed signalling another US rate hike.
The South Korean currency was initially the top gainer among its peers, up as much as 0.9% earlier in the day, but it fell later.
Stocks in Seoul fell 0.4%.
“The move by Korean authorities effectively removes some barriers for entry for foreign investors, with the net result likely to be greater liquidity and perhaps greater interest in trading the Korean won,” said Tim Waterer, market analyst at KCM Trade.
“There will now be less obstacles for offshore investors when it comes to trading the won, which in theory makes the currency a more enticing prospect to trade,” added Waterer.
The potential for another rate hike by the US Federal Reserve kept most other currencies mostly steady. The Philippine peso and the Thai baht were barely changed, rising 0.1% each.
Fed policymakers on Tuesday maintained a balanced tone and said they were weighing strong economic data and the impact of higher long-term bond yields as they consider if they will need to hike rates further to bring down inflation.
“Broadly, after the post-NFP rally, Asian FX are likely to settle into consolidative mode in the near-term,” said Fiona Lim, senior FX strategist at Maybank. Asian currencies and stock markets had risen after last week’s Fed board meeting and non-farm payrolls data (NFP).
South Korean won leads gains among muted Asian FX; equity markets mixed
Major stock markets in emerging Asia also dropped as risk sentiment took a dive after the recent rally “I think we are seeing last week’s relief rally settle down after US data and a subsequently dovish Federal Reserve,” said Kyle Rodda, a senior financial market analyst at Capital.com.
“The marginal loosening of financial conditions was especially beneficial for Asian markets, which are so sensitive to higher rates and a stronger dollar,” added Rodda.
Rodda said China’s growth outlook was still a major headwind. Debt-laden municipalities represent a major risk to the world’s second-largest economy, economists say, amid years of over-investment in infrastructure, huge bills to contain the COVID-19 pandemic and a deepening property crisis.
Equities in Singapore and Indonesia fell 1.3% and 1.0% respectively, emerging as the top losers. Currencies in both the countries were more or less muted in thin trading with the Singapore dollar flat and Indonesian rupiah rising 0.1%.
Stock markets in Thailand and Taiwan gained slightly, rising 0.2% and 0.5% respectively. Thailand’s main stock index has fallen about 15% so far this year, with foreign investors selling about 175 billion baht ($4.93 billion) of Thai shares.
A survey conducted by a capital markets group showed investor confidence in Thailand’s stock market has hit a five-month low on the back of capital outflows and the Israel-Hamas conflict.
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