SINGAPORE, Oct 11: Asian currencies rose on Friday as risk sentiment improved on growing hopes for a deal in Washington to end a fiscal standoff and possibly avoid a U.S. default.
Most emerging Asian currencies pushed higher, with the Malaysian ringgit, Thai baht and Indian rupee all rising roughly 0.3 percent.
Republicans offered a plan to President Barack Obama on Thursday that would extend the government’s borrowing authority for several weeks, staving off a default that could come as soon as Oct. 17.
No deal emerged from a 90-minute meeting at the White House, but talks continued into the night in an effort to re-open the government and extend the government’s borrowing authority beyond the mid-October deadline.
Asian currencies are likely to stay firm in the near term if the U.S. Debt ceiling is actually extended, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
This is partly because a short-term deal, rather than a longer-term solution, could add to uncertainty over just how soon the U.S. Federal Reserve will start tapering its bond-buying stimulus, he said.
‘The Fed won’t be able to step toward tapering unless there is a clear-cut resolution,’ Okagawa said, referring to the U.S. debt ceiling.
Market sentiment toward emerging Asian currencies has generally improved recently, after the U.S. Federal Reserve surprised markets in September by keeping its bond-buying stimulus programme unchanged.
The shock decision created uncertainty over how soon the Fed would start to scale back its bond-buying, and such doubts have been reinforced this month as the U.S. Government’s partial shutdown stirred worries about the potential impact on U.S. growth.
‘The expectation for tapering is now delayed,’ said a trader for a Malaysian bank in Kuala Lumpur.
‘But I sense people will look for opportunity to (go) long the dollar on dips,’ he added.
Market players remain cautious about the longer-term outlook for emerging Asian currencies, given the prospects for the Fed to start tapering its monetary stimulus eventually, even if the exact timing is unclear.
A recent Reuters poll showed that most Asian currencies were expected to depreciate in the next 12 months.
SINGAPORE DOLLAR
The Singapore dollar lagged behind its regional peers and eased slightly. A near-term focal point for the Singapore dollar is a monetary policy decision by Singapore’s central bank on Monday.
Singapore’s central bank is expected to keep monetary policy unchanged next week as it stays on guard against inflation while an expected contraction in third-quarter GDP is likely to be seen as a temporary blip.
The Monetary Authority of Singapore is seen likely to continue to let the local dollar appreciate at its current trajectory, according to a Reuters survey of economists.
(AGENCIES)
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