Singapore dollar up, won low

The Singapore dollar edged higher on Friday after suspected central bank intervention, though Asian currencies looked wobbly and remained vulnerable amid expectations the US Federal Reserve will pick up the pace of interest rate rises in 2017. The Singapore dollar rose 0.3 percent to 1.4465 per US dollar, pulling away from Thursday's low of 1.4517, which was its weakest level since August 2009.
The Singapore dollar held firm after pushing higher earlier on Friday. "There is talk of intervention activity in the markets, and with year end flow and liquidity lower, we are possibly seeing some exaggerated moves," said Saktiandi Supaat, head of FX research for Maybank in Singapore. "That could partly explain some of the sharp intraday SGD strength against the US dollar," he added.
The South Korean won and Taiwan dollar both added to their recent losses. The won hit a fresh 9-month low at 1,204.5 per dollar, while the Taiwan dollar touched its lowest level in nearly five months at 32.172. Foreign investor outflows from Taiwanese equities are seen as one of the catalysts behind the Taiwan dollar's recent weakness. Foreign investors may have pulled some money out of South Korean bonds recently and that may be weighing on the won, said Hirofumi Suzuki, an economist for Sumitomo Mitsui Banking Corporation in Singapore.
"Domestic investors (in South Korea) are probably buying bonds on the back of a worsening economic outlook... On the other hand, foreign investors are pulling funds out of emerging markets," Suzuki said. Emerging Asian currencies have declined broadly since early November, as the dollar and US bond yields jumped on expectations incoming US President Donald Trump's plans to boost infrastructure spending and cut taxes will boost economic growth and inflation.
Asian currencies have come under renewed pressure after the Fed raised interest rates last week for the first time in a year, and also signalled three hikes in 2017. Higher US interest rates and bond yields can reduce the attractiveness of investing in emerging market assets and spur capital outflows from these countries. The Singapore dollar showed little reaction after November industrial production came in stronger than expected.