* Asian currencies pull back in wake of last week’s rally
* Analysts wary about risk that dollar strength may return
* Singapore dollar may take cues from data due this week
(Adds text, updates prices)
By Masayuki Kitano
SINGAPORE, March 21 (Reuters) – Asian currencies edged lower
on Monday, with analysts wary of the risk that U.S. dollar
strength could return in coming months as the Federal Reserve
considers raising U.S. interest rates.
Most Asian currencies lost steam after many of them set
multi-month highs last week, when they rallied as the Fed turned
less hawkish in its expectations for interest rate rises in
2016.
The Fed’s policy statement and interest rate projections
unveiled last Wednesday provided temporary relief for emerging
Asian currencies, said Sim Moh Siong, FX strategist for Bank of
Singapore.
“For now there’s bit of relief. We perhaps could see a bit
of extension in the carry trades,” Sim said, referring to trades
in which investors sell lower-yielding currencies to finance
investment in higher-yielding currencies and assets.
“But come June, if the improving picture in the U.S. holds,
then I think the market will start to worry again about Fed rate
hikes and what this means for Asian currencies,” he added.
Traders said a drop in global oil prices weighed on the
Malaysian ringgit. Buying of the U.S. dollar by interbank
speculators dented the Singapore dollar.
Although the Indonesian rupiah retreated, its losses
were limited by dollar-selling by foreign players.
SINGAPORE DOLLAR
The Singapore dollar could take its cues from data on the
consumer price index (CPI) and core CPI for February due on
Wednesday, and industrial production data on Thursday.
In addition, the Singapore government is due to unveil its
2016 budget on Thursday.
While the budget is unlikely to have any major impact on the
Singapore dollar, one detail to watch is the estimated size of
the “fiscal impulse”, or the degree of fiscal support for the
economy, said Michael Wan, an economist for Credit Suisse.
If the impulse were to turn negative, it may increase the
onus on monetary policy to support growth, he added.
“If you get a budget that is very clearly… negative for
growth this year, then it would increase the probability of some
easing by the central bank,” he said.
“That’s not our expectation,” Wan said, adding that the
government’s fiscal stance in the 2016 fiscal year is likely to
be supportive of growth, but probably less so than last year.
Most analysts in a Reuters poll published in early March
said their baseline expectation was for the MAS to keep policy
unchanged at its semiannual policy review in April, barring
risks such as a sharper slowdown in China.
CURRENCIES VS U.S. DOLLAR
Change on the day at 0536 GMT
Currency Latest bid Previous day Pct Move
Japan yen 111.49 111.56 +0.06
Sing dlr 1.3596 1.3588 -0.06
Taiwan dlr 32.4010 32.5200 +0.37
Korean won 1163.20 1162.5000 -0.06
Baht 34.91 34.8400 -0.20
Peso 46.45 46.3600 -0.19
Rupiah 13160.00 13115.0000 -0.34
Rupee 66.47 66.5150 +0.07
Ringgit 4.0680 4.0530 -0.37
Yuan 6.4851 6.4730 -0.19
Change so
far in 2016
Currency Latest bid End prev year Pct Move
Japan yen 111.49 120.30 +7.90
Sing dlr 1.3596 1.4177 +4.27
Taiwan dlr 32.401 33.0660 +2.05
Korean won 1163.20 1172.5000 +0.80
Baht 34.91 36.0000 +3.12
Peso 46.45 47.0600 +1.31
Rupiah 13160.00 13785.0000 +4.75
Rupee 66.47 66.1500 -0.48
Ringgit 4.0680 4.2935 +5.54
Yuan 6.4851 6.4936 +0.13
(Additional reporting by IFR Market’s Catherine Tan; Editing by
Richard Borsuk)
