Wednesday, 21 February 2018 | MYT 2:49 PM
Most Asian currencies weaken as rising yields boost dollar
BENGALURU: Most Asian currencies edged lower on Wednesday as the dollar was bolstered by rising U.S. Treasury yields and optimism ahead of Federal Reserve’ last policy meeting minutes, to be released later in the day.
The dollar index was up 0.2 percent at 89.686. It is up 1.6 percent from Friday’s three-year low of 88.251.
Andy Ji, a strategist for Commonwealth Bank of Australia in Singapore, said rising U.S. Treasury yields will put pressure on Asian currencies in coming months.
“Market is looking at the threshold of 3 percent in 10-year U.S. Treasury yield. If it reaches that level, there is going to be a large risk reduction in the markets,” Ji said.
He added it will support the dollar against the Asian currencies.
The U.S. 10-year Treasury yields were at 2.8877 percent in Asian hours, hovering near a four-year peak. The rise in yields came as investors made room for this week’s deluge of $258 billion of government debt supply.
A MUFG report said the minutes of the Federal Reserve’s last policy meeting would be more hawkish and would support the dollar.
“The minutes is likely to reveal an increase in the number of FOMC participants that have incorporated fiscal stimulus in their outlook, as opposed to âless than halfâ at the December meeting,” the report said.
“These assessments are important as it would give us an inkling of what the updated dot plot at the 21 March meeting may be, with the possibility of an upward revision in the longer term federal funds rate (FFR) projections.”
In Asia, the South Korean won fell for the fourth consecutive session, while the Malaysian ringgit, Indian rupee and the Thai baht also declined.
On Wednesday, South Korea’s central bank chief said on Wednesday the Bank of Korea is prepared to respond to any negative impact from faster-than-expected policy tightening in the United States.
Bucking the trend, the Taiwan dollar and the Philippine peso edged higher.
The Indian rupee touched a three-month low of 64.94 per dollar.
The rupee has lost about 1 percent this week and is the second worst performing Asian currency against the dollar this year.
The recent losses were due to concerns over the country’s widening trade deficit and growing fallout from the $1.8 billion Punjab National Bank fraud.
Exchange data showed total foreign investments in Indian equities and bond markets have turned negative this month.
The Indonesian rupiah was up 0.07 percent on the day.
Analysts said the rupiah rise was due to rupiah bonds’ eligibility to be included in the Bloomberg Barclays Global Aggregate Bond Index from June 1, 2018.
“We believe this is medium-term positive rupiah bonds, as it will encourage a wider set of foreign investors to participate in the rupiah bond market.” said a Standard Chartered report.
“Additional inflows in the coming months support our view of slight rupiah appreciation as a means to contain inflationary pressure. We forecast rupiah at 13,000 by mid-year.” the report said.
On Wednesday, Indonesia’s central bank governor said it can overcome the external pressures on rupiah. - Reuters