Asian forex: Trade-reliant Asian currencies advance

Updated 23 Oct, 2019

Trade-exposed Asian currencies got some support on Tuesday from upbeat comments on the progress of US-China trade negotiations, but other units were capped by cautious investor sentiment. Both the United States and China said talks on resolving their bitter trade war were progressing with White House adviser Larry Kudlow adding that tariffs scheduled for December could be withdrawn.

South Korea's won and the Taiwan dollar each strengthened 0.1%, having eased off earlier highs. The won had climbed to its strongest level in nearly four months. Sentiment remains cautious given the unpredictable nature of the talks between the two countries in the past. "We had been here before," Zhu Huani, a Singapore-based economist with Mizuho Bank wrote in a note.

She cited the abrupt end to talks in May when things were reportedly going well, and that a partial deal may not address slowing global growth. The rupee is set for its fourth session of gains, advancing 0.3% to 70.955 against the dollar. "Markets anticipate another rate cut by the Fed which will make high-yielding currencies more attractive, which is helping the rupee pull some gains," said Khoon Goh, ANZ's head of Asia research, referring to next week's Federal Reserve policy meeting.

The equity market in India has also been on the upside, boosted by government measures to shore up the stuttering economy. Barclays expects further near term consolidation in the rupee due to improved risk sentiment and resumption of foreign investor equity purchases. Elsewhere, the Malaysian ringgit eased 0.1% as worries mount over the potential impact of a call by India's top vegetable body to stop buying the edible oil from the Southeast Asian country.

In 2018, India was Malaysia's third-largest export destination and vegetable oil contributed 2.8% of Malaysia's gross domestic product and 4.5% to total exports last year. Indonesia's rupiah gained the most in the region, up 0.5% against the dollar as markets took a positive view of the country's new cabinet.

The make-up of the cabinet was being closely watched to see how many technocrats - who are more likely to fall in with President Joko Widodo's plans for boosting growth and investment - were included. Widodo asked opposition leader Prabowo Subianto to join his new cabinet, and also tapped co-founder of tech start-up Gojek and a former chairman of Inter Milan for posts. The country's central bank will decide on Thursday whether to cut rates for a fourth straight month, with a majority of those polled by Reuters expecting one.

Copyright Reuters, 2019

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