Asian currencies hit seven-month high on US ‘Gold Bull’ scenario

(Bloomberg) — Asian currencies hit seven-month highs as U.S. recession worries eased, bets on Federal Reserve interest rate cuts next month and an improving domestic backdrop lifted sentiment in the region.

Bloomberg’s most read

The Bloomberg Asian dollar index gained as much as 0.6 percent on Monday to its highest since January. The South Korean won and Malaysian ringgit led the regional advance on an upbeat growth outlook, and the Thai baht rose on easing political tensions.

“It feels like a Goldilocks scenario, where recession fears in the US are fading while growth momentum in the region remains subdued,” said Christopher Wong, currency strategist at Oversea-Chinese Banking Corp. “There is room for Asian ex-Japan currencies. recovery on the back of central banks in developed markets, largely on an easing trend.”

The ringgit rose 1.5 percent to 4.3678 per dollar, the strongest since February 2023. On Friday, the nation reported stronger-than-expected second-quarter gross domestic product growth from a year earlier , while global funds poured in the most. cash in its June stock market.

The baht extended gains to 34.409 per dollar, its highest since January, after Paetongtarn Shinawatra won enough votes in parliament on Friday to become Thailand’s next prime minister.

While her appointment helped quell concerns of a prolonged political vacuum after her predecessor was ousted by the Constitutional Court, the currency could face a bumpier road amid reports that the new government could abandon a $14 billion digital cash distribution program. The relationship between the new government and the Bank of Thailand will also be under renewed scrutiny due to the new prime minister’s previous criticism of the central bank.

Economists Goldman Sachs Group Inc. over the weekend cut the likelihood of a U.S. recession next year to 20 percent from 25 percent, citing better-than-expected U.S. retail sales last week and jobless claims data. They also said they were “more confident” the Fed would cut interest rates by 25 basis points at their September policy meeting.

Easing concerns about a recession in the world’s largest economy is a positive for export-oriented Asian nations. South Korean won rose 1.5 percent to 1,331.35, the highest since March. The Philippine peso rose 1 percent to 56.66 per dollar, its biggest gain since November.

The story continues

The yen advanced as much as 1.2 percent to 145.87 per dollar as traders waited to see if Bank of Japan Governor Kazuo Ueda would provide clues about the central bank’s rate hike trend in his appearance in front of parliament on 23 August.

The Bloomberg Dollar Spot Index fell 0.3 percent as traders awaited Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium later this week for signs of interest rate cuts. A gauge of aggregate demand for rising call options versus bearish U.S. currency puts showed traders were divided on which direction to hedge after paying for bets on a stronger dollar for much of the year.

Regional stocks also rose on Monday, with the benchmark MSCI Asia Pacific index rising nearly 1 percent to head for its highest close in months.

“The market expects a better picture for Asian economies in the coming quarters,” said Tomo Kinoshita, global market strategist at Invesco Asset Management Japan. He expects investors to allocate more funds to Asian stocks, especially those in India, Indonesia and Malaysia.

–With assistance from Winnie Hsu and George Lei.

(Updates market moves throughout.)

Bloomberg Businessweek’s most read

©2024 Bloomberg LP