Asian Currency Overview via Reuters

(Reuters) – Most emerging Asian currencies crawled higher on Tuesday, with the dollar holding steady ahead of a congressional vote on U.S. tax cuts, while the Thai baht softened on expectations interest rates would be kept near record lows.

The dollar index, which tracks the U.S. currency against a basket of six major rivals, was flat at 93.699, as some traders questioned the overall impact of the tax overhaul on the U.S. economy.

Global markets have been buffeted in recent weeks by shifting expectations about President Donald Trump’s ability to push through his signature policy.

 “(President) Trump being unable to get his policy through is going to weigh on the dollar positivity and that is going to play favourably to regional currencies,” said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.

The Malaysian ringgit and the Korean won gained as much as 0.2 percent, while the Indian rupee inched up about 0.1 percent.

Along with the baht, the Singapore dollar and the Philippine peso also slipped.

“The year-end position adjustment distortions can run havoc on currency movement and even more so in emerging Asia,” Innes said.

The baht fell as much as 0.8 percent to its lowest since Nov. 17, posting its steepest intraday drop in more than a year.

Thailand’s central bank is expected to leave its benchmark interest rate near record lows on Wednesday, the year’s final review, as economic growth picks up, inflation is still tame and high household debt remains a worry.

“The monetary policy will keep rates on hold and it looks like they will do so in 2018 as well, so this sets up regional cross trades to sell the baht,” said Innes.

Seven of 10 analysts in a Reuters poll who expressed a longer-term view on rates predicted no policy change throughout 2018.

POLITICAL UNCERTAINTY

The Indian rupee rose 0.1 percent on Tuesday, after hitting a low of more than 1 percent in the previous session as the Gujarat state election votes were being counted.

“The rupee is being driven by political uncertainty rather than any specific macro drivers after (Prime Minister) Modi had a so-so victory but lost 14 seats,” Innes said.

“I think the political risk will evaporate quickly and the market will refocus on macro drivers, but it may not happen until the new year.”

The rupee, however, pared nearly all of its losses on Monday, as votes progressed and Prime Minister Narendra Modi’s party appeared to win elections in his home state of Gujarat for a sixth term

Reuters

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.