BENGALURU Emerging Asian currencies strengthened on Thursday (Feb 2), with the Singapore dollar climbing a more than five-year peak, as US Federal Reserve Chair Jerome Powell's comments on disinflation lifted risk sentiment.
Singapore's dollar appreciated 0.2% to 1.3038 per US dollar, its highest since January 2018, and has been on an upward trajectory this year due to rising expectations of easing inflation and less aggressive monetary tightening this year.
"The Singapore dollar NEER (nominal effective exchange rate) has retreated from the top towards the mid-point of (the Monetary Authority of Singapore's) policy band, a sign that policy focus may start to shift from inflation towards economic slowdown," DBS Bank foreign exchange strategist Philip Wee said.
Other regional currencies including the Philippine peso, Indonesia's rupiah and South Korea's won strengthened between 0.7% and 1% to hit multi-month highs against a softer US dollar.
"The peso came under heavy fire last year after when the Fed started its rapid fire rate hike cycle. We're seeing the backside of that now and the peso is reacting as expected," ING senior economist Nicholas Mapa said.
Malaysia's ringgit rose 0.6%, while the Thai baht appreciated 0.3%.
Asian currencies are in a sweet spot following Powell's presser which was less hawkish than feared, said Fiona Lim, senior FX strategist at Maybank.
The Fed raised interest rates by a widely expected 25 basis points (bps) on Wednesday, with Powell saying a "disinflationary process has started" - a sign markets interpreted as signalling the end of its rate-hiking cycle is near.
"While Powell did say he doesn't see the Fed cutting rates this year, the absence of any forceful push-back against market expectations for rate cuts somewhat lent support to sentiment," OCBC currency strategist Christopher Wong said.
The dollar index, which measures the greenback against six major peers, fell to a nine-month low of 100.80 following Powell's remarks.
India's rupee inched 0.1% higher, while shares shed 0.2% amid Adani group's deepening rout. The conglomerate shelved a US$2.5 billion share sale, bringing its cumulative market capitalisation losses to US$100 billion since last week's short-seller attack.
Stocks in Asia were broadly higher, with equities in Taipei advancing 1.1% and Indonesia's benchmark index rising 0.3%. Stocks in Kuala Lumpur and Bangkok were up 0.1% each.
Shares in Phillippines declined 1% and Singapore fell 0.5%.
- Reuters
