SINGAPORE: The South Korean won and Malaysian ringgit fell on Friday, Aug 20 as investors shunned riskier assets after weaker-than-expected U.S. data, but further currency gains are expected in Asia in line with its solid economic recovery.
The dollar hovered near a 15-year trough against the yen as Japanese Finance Minister Yoshihiko Noda said Tokyo is communicating with other Group of Seven countries on currencies amid growing concern the strong yen will further dent Japan's export-reliant economy.
Investors don't expect the Japanese government to intervene unless the yen strengthens much further beyond the 15-year high.
Data on Thursday showed new U.S. jobless claims hit a nine-month high last week, and mid-Atlantic manufacturing shrank in August for the first time in more than a year, adding to worries that the U.S. economy was stalling.
WON
The won shed 0.8 percent to 1,182 per dollar as worries about a slowing U.S. economy, South Korea's No.3 export market, caused investors to shun riskier assets including Seoul shares.
"The mood for the won quickly changed after the weak U.S. data. Exporters are keeping the won in a tight range, but their demand is not that strong," said a local bank dealer.
Barclays Capital raised its outlook on the won, citing strong economic growth and saying foreign exchange authorities are unlikely to aggressively check its gains as inflationary pressures grow.
Barclays raised its six-month target of the won to 1,075 from 1,100, and its 12-month target to 1,050 from 1,075. It maintains a one-month target of 1,150 and a three-month at 1,125.
"Given that monetary tightening will likely come in 'baby steps', we believe rate hikes could be supplemented by more rapid appreciation of the won to ward off imported inflation pressure, one-side appreciation expectations in the exchange rate," it said in a research note.
Authorities have repeatedly checked won gains so far this year.
Sean Callow, strategist at Westpac, expects the won to rise to 1,150 by the end of 2010 and to 1,120 over next 12 months.
"I don't think inflation is a big threat, with growth likely to cool slightly and oil prices weighed by global slowdown. But obviously rates need to rise further," he said.
"In the near term, global risk appetite will probably be sufficiently jittery to prevent steep dollar/won decline -- BOK might not need to do that much."
RINGGIT
The Malaysian ringgit fell tenth of a percent to 3.1370 per dollar, off a 13-year peak of 3.1273 hit the previous day after the central bank's currency liberalisation measures.
Investors expect further ringgit gains due to its increased yield advantage as domestic interest rates climb.
"I think we can expect slow gains in ringgit, hitting 3.12 and 3.10 in one to two months. In between it could test back to 3.17," said a trader in Kuala Lumpur.
The currency last hit 3.10 in mid-October 1997.
The ringgit, the top performing currency in Asia, has gained just over 9 percent against the dollar so far this year,
and 1 percent this week alone.
BAHT
The Thai baht was near its 28-month high at 31.40 per dollar, with Bank of Thailand struggling to check its strength.
"The baht's rally is being sustained by capital inflows and the ringgit's liberalisation since yesterday. It should range 31.45-55 today," said Bangkok-based trader.
"The broad Asian stock consolidation this morning may not necessarily halt the bullish Thai stock market which may see its index testing 900 next week if not today," the trader added.
The baht has gained 1.2 percent in the past week and 5.7 percent this year, the third-best Asian performer after the ringgit and yen.
YUAN
Dollar/yuan NDFs were soft after a slightly firmer yuan fixing, bucking the dollar's broad strength.
"The whole curve moved leftwards slightly on cautious selling amid a weak stock market," said an NDF trader at an Asian bank in Hong Kong.One-year NDFs stood at 6.6810 compared to Thursday's 6.6790 and last Friday's 6.6900, pricing in 12-month yuan appreciation of 1.61 percent.
Spot yuan was at 6.7888 per dollar, up slightly from Thursday's 6.7902. - Reuters
The dollar hovered near a 15-year trough against the yen
Investors don't expect the Japanese government to intervene unless the yen strengthens much further beyond the 15-year high.
Data on Thursday showed new U.S. jobless claims hit a nine-month high last week, and mid-Atlantic manufacturing shrank in August for the first time in more than a year, adding to worries that the U.S. economy was stalling.
WON
The won shed 0.8 percent to 1,182 per dollar as worries about a slowing U.S. economy, South Korea's No.3 export market, caused investors to shun riskier assets including Seoul shares.
"The mood for the won quickly changed after the weak U.S. data. Exporters are keeping the won in a tight range, but their demand is not that strong," said a local bank dealer.
Barclays Capital raised its outlook on the won, citing strong economic growth and saying foreign exchange authorities are unlikely to aggressively check its gains as inflationary pressures grow.
Barclays raised its six-month target of the won to 1,075 from 1,100, and its 12-month target to 1,050 from 1,075. It maintains a one-month target of 1,150 and a three-month at 1,125.
"Given that monetary tightening will likely come in 'baby steps', we believe rate hikes could be supplemented by more rapid appreciation of the won to ward off imported inflation pressure, one-side appreciation expectations in the exchange rate," it said in a research note.
Authorities have repeatedly checked won gains so far this year.
Sean Callow, strategist at Westpac, expects the won to rise to 1,150 by the end of 2010 and to 1,120 over next 12 months.
"I don't think inflation is a big threat, with growth likely to cool slightly and oil prices weighed by global slowdown. But obviously rates need to rise further," he said.
"In the near term, global risk appetite will probably be sufficiently jittery to prevent steep dollar/won decline -- BOK might not need to do that much."
RINGGIT
The Malaysian ringgit
Investors expect further ringgit gains due to its increased yield advantage as domestic interest rates climb.
"I think we can expect slow gains in ringgit, hitting 3.12 and 3.10 in one to two months. In between it could test back to 3.17," said a trader in Kuala Lumpur.
The currency last hit 3.10 in mid-October 1997.
The ringgit, the top performing currency in Asia, has gained just over 9 percent against the dollar so far this year,
and 1 percent this week alone.
BAHT
The Thai baht
"The baht's rally is being sustained by capital inflows and the ringgit's liberalisation since yesterday. It should range 31.45-55 today," said Bangkok-based trader.
"The broad Asian stock consolidation this morning may not necessarily halt the bullish Thai stock market which may see its index testing 900 next week if not today," the trader added.
The baht has gained 1.2 percent in the past week and 5.7 percent this year, the third-best Asian performer after the ringgit and yen.
YUAN
Dollar/yuan NDFs were soft after a slightly firmer yuan fixing
"The whole curve moved leftwards slightly on cautious selling amid a weak stock market," said an NDF trader at an Asian bank in Hong Kong.One-year NDFs
Spot yuan was at 6.7888
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