Emerging Asian currencies rose broadly on Wednesday after the dollar was pressured by US President-elect Donald Trump's comments showing concern over the greenback's strength. The Thai baht climbed to around 35.22 per US dollar at one point, its highest level in more than two months. The Taiwan dollar touched a three-month high at 31.410.
The onshore yuan hit a high of 6.8483 per dollar at one point, its strongest level since mid-November, but later turned lower.
Asian currencies gained a boost as the dollar languished near its lowest levels since early December against a basket of six major currencies. The dollar index last stood at 100.49, after sliding to 100.26 on Tuesday, its lowest since December 8.
A selloff in the dollar had deepened on Tuesday after US traders returned from a long weekend and reacted to Trump's weekend comments. In an interview with the Wall Street Journal, Trump said US companies "can't compete with (China) now because our currency is strong and it's killing us."
That gave an added lift to Asian currencies, which have risen this month on the back of a fierce short-squeeze in the yuan, and as the dollar fell after a news conference by Trump last week offered little clarity on his plans for fiscal stimulus.
There will probably be some more profit-taking in long dollar positions going into Trump's inauguration on January 20, especially given the uncertainty over what Trump will actually do and how soon, said Jesper Bargmann, head of trading for Nordea Bank in Singapore.
"It's going to be very important that he does something around fiscal stimulus, tax cuts and investment pretty quick. Otherwise I think the market will get nervous and sell dollars again," Bargmann said.
A Reuters poll last week showed that market positioning was seen as being long the US dollar against most emerging Asian currencies.
Trump's comments on the dollar's strength were probably aimed at managing the pace of the US currency's rise, said Heng Koon How, senior FX investment strategist at Credit Suisse.
While the dollar may stay weak for now, its strength will probably return after a month or two, Heng said.
The US Federal Reserve is likely to gradually raise interest rates, and if Trump succeeds in implementing fiscal stimulus, that will trigger the next phase of US growth and inflation, he said.
Published under arrangements with Reuters.
No content from Business Recorder shall be reproduced, published, broadcast, rewritten for broadcast or publication, or redistributed directly or indirectly in any medium.
Business Recorder shall not be responsible or held liable for any error of fact, opinion or recommendation and also for any loss, financial or otherwise, resulting from business or trade or speculation conducted, or investments made, on the basis of the information posted here. Nor shall Business Recorder be held liable for any actions taken in consequence." >Copyright Reuters, 2017