Asian currencies: Ringgit, Thai baht at over 2-year highs

BENGALURU: Asian emerging market currencies were on a roll on Friday, with the Malaysian ringgit and the Thai baht flirting with multi-year highs, boosted by a rally in the Chinese yuan on the back of Beijing’s spree of stimulus measures.

China’s huge stimulus package, aimed at pulling the world’s second-largest economy out of its deflationary slump, has been a boon for the markets in Asian emerging countries that rely on trade and tourism-linked flows from China.

“EM (Emerging Markets) and particularly China is likely to outperform as the USD weakens and investors hunt for higher returns; foresee possible rotation out of the expensive and crowded global tech trade into cheaper EM assets,” David Chao, global market strategist, Asia Pacific (ex-Japan) at Invesco, said.

China’s yuan slipped marginally as traders took profit ahead of the Golden Week holidays starting next Tuesday, but hovered near its strongest level in 16 months. It has gained 0.5% this week.

Equities in China were headed for their best week since November 2008. An MSCI gauge of Asian emerging market equities advanced 1.4% to touch its highest since mid-February 2022. The index was set to end the week 7% higher, and the month 8% higher.

Those gains were largely on the back of stocks in China and Taiwan, which make up more than half of the index.

Analysts at Maybank in a client note said “the surge in the yuan and lift in the optimism on the Chinese economy” will be a positive driver for Asian currencies, alongside the US Federal Reserve’s monetary policy easing and the Japanese yen rallying on Bank of Japan’s tightening cycle.

The Malaysian ringgit rebounded from a slight dip in the previous session, appreciating up to 0.7% to 4.123 per dollar and hovering around a level last seen in February 2022.

The Thai baht clocked its eighth consecutive day of gains on Friday, appreciating to 32.35 per dollar - its highest level since early March 2022.

The baht and ringgit are among the best-performing currencies in the region this month, advancing more than 4% each, with the ringgit clocking its third straight month of gains, boosted by a confluence of factors including political stability and strong foreign inflows.

However, equities in Asian emerging markets retreated on Friday, with shares in the Philippines and Indonesia losing up to 0.7% each.

Stocks in Malaysia lost up to 0.8%, while those in Singapore slipped 0.6%.

MSCI gauge of equities in ASEAN countries slipped 0.5%. It was however set for its seventh straight week of gains.

Meanwhile, data due next week is expected to show inflation in Indonesia and the Philippines trended lower in the month of September, Citi analysts wrote.