Asian currencies rose on Friday and were headed for weekly gains after the European Central Bank’s new bond-buying programme increased risk appetites, though caution before key data from the U.S. and China capped gains.
The Taiwan dollar hit a two-month high on demand from foreign banks and the South Korean won touched a near four-week peak. The Philippine peso reached its strongest in more than a month.
ECB President Mario Draghi, backing up his pledge to do whatever it takes to the save the euro, announced a new and potentially unlimited bond-buying programme aimed at lowering painfully high borrowing costs of indebted members on Thursday.
The announcement helped the euro hit a two-month high and put Asian stocks on track for their biggest daily gain in six weeks.
Risk is back on as the ECB did deliver measures, said BNP Paribas currency strategist Thio Chin Loo in Singapore, expecting emerging Asian currencies to rise further.
Investors are keeping an eye on August U.S. non-farm payroll data due later on Friday. Thio said that no matter how many jobs were added, the number is unlikely to much weaken views that the Federal Reserve may announce quantitative easing moves to spur the world’s top economy after a Sept. 12-13 policy meeting.
The payroll number is expected to rise 125,000, and she said it needs to be sustainably above 200,000 a month to get the U.S. unemployment rate down.
Most emerging Asian currencies have advanced for the week. As of 0725 GMT, the peso had gained 0.8 percent versus the greenback this week with the Singapore dollar up 0.7 percent, according to Thomson Reuters’ data.
Still, investors hesitated to add more bullish bets on regional units before the U.S. labor market data and amid sustained worries about a slowing global economy.
They are also waiting for economic indicators from China. Data on August inflation, industrial output and retail sales are due to released on Sunday.
New quantitative easing would be positive for Asian currencies but slowing regional growth prospects, led by China, may keep them from going on a one-way strengthening street, said Enrico Tanuwidjaja, an Asia economist at the Royal Bank of Scotland in Singapore.
Amid such worries, the won could not fully enjoy a sovereign upgrading late on Thursday from Fitch Ratings.
South Korean importers also bought dollars, preventing the won from strengthening past 1,130 per dollar, traders said. Caution over possible intervention by regional authorities to help their export-dependent economies may also check upside of emerging Asian currencies, dealers and analysts said. Gains in the Singapore dollar and the Taiwan dollar were capped by market talk of intervention by their central banks, dealers said.
TAIWAN DOLLAR The Taiwan dollar rallied to 29.77 per U.S. dollar, its strongest since July 6 on demand by foreign banks after the ECB’s decision.
The island’s central bank was spotted buying the U.S. dollar at 29.78-29.80 to slow the local unit’s strength, increasing caution over its intervention, dealers said. Such intervention caused some foreign banks to take profits from the Taiwan dollar. But the authority may temporarily allow the Taiwan dollar to strengthen to 29.75 versus the greenback until the Fed meeting next week, dealers added.
WON
The won advanced to 1,129.0 per dollar, its strongest since Aug. 14, but South Korean importers bought dollars for payments, cutting its gains. Offshore funds also joined the importers, especially when the local unit was firmer than 1,130, dealers said.
Those dollar bids came even after Fitch raised South Korea’s government bond rating to AA- from A+, rating the country a notch above China, Japan and Taiwan. Despite some fluctuations tracking the euro, it is right to buy dollars below 1,130, said a senior foreign bank dealer in Seoul.
PHILIPPINE PESO
Interbank speculators lifted the Philippine peso to 41.70 per dollar, the local unit’s strongest since Aug. 6, according to Thomson Reuters data.
Traders cut optimistic bets on the peso before the U.S. job data and Chinese indicators, although the best performing emerging Asian currency this year is seen staying firm, dealers said.
It was more of euphoria after the ECB brought a bazooka to a gun fight. But after the dust settles, it will be back to economics again, said a European bank dealer in Manila.
The peso is still enjoying good fundamentals and any uptick in the dollar is seen as a good chance to reinstate short dollar positions, although it is not immune to external shocks, the dealer added.
RINGGIT
The ringgit rose 0.3 percent, while traders took profits before the U.S. and China data.
A Kuala Lumpur-based dealer said few investors wanted to add ringgit holdings when it was firmer than 3.1100 per dollar, given a slowing global economy. Malaysia’s trade surplus slumped to its smallest in more than a decade as exports to Europe and China fell sharply, data showed on Friday.
The dealer said a comment from rating agency Standard & Poor’s on the country may also weigh on the ringgit. On Wednesday, S&P said it may lower the sovereign ratings if the government can’t deliver the reform measures to reduce its fiscal deficits and increase the country’s growth prospects.
CURRENCIES VS U.S. DOLLAR
Change on the day at 0725 GMT Currency Latest bid Previous day Pct Move Japan yen 78.93 78.87 -0.08 Sing dlr 1.2401 1.2423 +0.18 Taiwan dlr 29.777 29.902 +0.42 Korean won 1130.10 1133.80 +0.33 Baht 31.22 31.22 +0.02 Peso 41.71 41.87 +0.38 Rupiah 9580.00 9560.00 -0.21 Rupee 55.48 55.65 +0.31 Ringgit 3.1080 3.1175 +0.31 Yuan 6.3401 6.3428 +0.04 Change so far in 2012 Currency Latest bid End prev year Pct Move Japan yen 78.93 76.92 -2.55 Sing dlr 1.2401 1.2969 +4.58 Taiwan dlr 29.777 30.290 +1.72 Korean won 1130.10 1151.80 +1.92 Baht 31.22 31.55 +1.07 Peso 41.71 43.84 +5.11 Rupiah 9580.00 9060.00 -5.43 Rupee 55.48 53.08 -4.33 Ringgit 3.1080 3.1685 +1.95 Yuan 6.3401 6.2940 -0.73
