Asian currencies firmed on Thursday, boosted by heftier global risk appetites as the dollar slipped despite stronger-than-anticipated US inflation and a rise in Treasury yields. Tracking a rally in Wall Street, Asian stocks brushed aside US inflation data that showed that January core CPI posted the largest gain in a year, raising pressure on the Federal Reserve to be more aggressive in raising US interest rates this year.
The dollar index weakened to a near 2-week low, after the rebound in equities, evoking the idea that the greenback might be in a period of persistent weakness. "The dollar advanced against other currencies when US CPI inflation was released but pared the gains and weakened later as US equities proved more resilient, with the VIX index pulling back further below 20," said Qi Gao, FX strategist (EM Asia) at Scotiabank.
"Continued risk appetite sent Asian currencies higher this morning, I think risk appetite will likely continue as synchronized global growth is expected to boost the EUR and JPY, while bolstering EM Asian currencies as long as risk appetite sustains."
The Malaysian ringgit led gains among regional currencies as it firmed 0.6 percent, while the Indian rupee strengthened 0.3 percent.
The Philippine peso, the worst performing Asian currency in 2018, also rode on the positive sentiment to strengthen 0.3 percent, on track to end five-consecutive sessions of losses. The Singapore dollar firmed 0.1 percent after data showed that the city-state's annual exports in January surged despite another decline in electronics shipments, helped by a jump in sales of petrochemical products.
The Korean won, Chinese yuan and Taiwan dollar did not trade on Thursday, because of the Lunar New Year holiday. The rupiah strengthened 0.5 percent, even though Indonesia's statistics bureau on Thursday said the country in January had a $670 million trade deficit, while a Reuters poll had forecast a $190 million surplus.
The baht firmed 0.5 percent on Thursday.
Thailand's central bank left its benchmark interest rate unchanged on Wednesday, near record lows, saying it expects inflation to stay largely subdued even as Southeast Asia's second-largest economy gains further momentum. The central bank said the economic outlook had improved on the back of strong global demand for its exports, but recovering domestic demand and inflation developments should be monitored.