Asian currencies push higher as Trump woes weigh on dollar


Posted at Jul 12 2017 05:22 PM

Most Asian currencies were higher on Wednesday against the dollar, which was hit by new suggestions of Russian influence in the 2016 U.S. presidential election and amid wider caution ahead of Federal Reserve chair Janet Yellen's semi-annual congressional address.

The currencies of South Korea, Taiwan and Thailand all posted their biggest intraday percentage gains in at least a month as investors pared their greenback positions, although the Philippine peso hovered just above a record low it hit on Tuesday on concerns about the country's trade deficit. 

Emails from the U.S. president's eldest son, Donald Trump Jr., showed he agreed to take Russian help to find damaging evidence against rival candidate Hillary Clinton during the presidential race last year. 

This comes right before the Yellen's much-awaited address where she is expected to shed some light on the pace of tightening after Fed Governor Lael Brainard's comments on Tuesday disappointed some dollar bulls.

The dollar index, which tracks the greenback against six major rivals, was 0.09 percent lower at 95.580 at 0540 GMT.

"Markets are mulling the fairly subdued FOMC tightening theme ahead of Yellen's speech and I think that this corresponds to softer yields also giving rise to some of the pulls that we see in these currencies," said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore.

"The reallocation out of the dollar... has benefited some of the low yielding Asian currencies because they are deemed to be a hedge position."

Such currencies include the Taiwan dollar, the South Korean won and to an extent the Singapore dollar, he says, as they have much lower interest rates and correspondingly low yields.

The South Korean won was up as much as 0.6 percent, its biggest intraday percentage gain in more than 1 month. 

The Taiwan dollar and the Thai baht followed, each rising 0.4 percent. The baht snapped six losing session and hit its biggest intraday percent gain in a month, while the Taiwan dollar gained its most in a day since late May 22.

The Singapore dollar was up 0.1 percent. Data showed that Singapore retail sales for May rose 0.9 percent from a year earlier. 

The Malaysian ringgit was up 0.06 percent, little moved by domestic industrial production for May, which rose 4.6 percent from a year earlier.

The peso bucked the trend for the day, falling to 50.55 from its previous close of 50.53 after hitting its lowest since 2006 in its previous session as data showed that Philippines posted its widest trade deficit in decades in May.

Joey Cuyegkeng, Senior Economist, Asia at ING said while the widening trade deficit can be viewed as positive from a domestic demand perspective, the currency may weaken further in the near-term owing to a further widening in the deficit. 

"From a currency stand point, until investors feel that imports work through the economy and push it to a higher growth path, then the market focus would be on the near term impact of a deterioration in balance of trade through a weaker exchange rate," Cuyegkeng said.

Investors will now be looking at the next remittance report he says, for an indication on whether structural inflows can mitigate the deterioration in the trade balance.