Most Asian currencies strengthened on Wednesday as a surprise 50 basis point rate cut by the US Federal Reserve overnight sent yield-seekers looking east, with the Indonesian rupiah leading gains.
Indonesia’s finance minister affirmed that the rate cut could trigger capital inflows to the country. Its currency strengthened as much as 1 percent against the dollar to 14,130 rupiah, while stocks climbed 2 percent.
The interest rate differential caused by the surprise cut is aiding gains in regional currencies against the dollar, said Jingyi Pan, a Singapore-based market strategist with financial services firm IG.
“The willingness of the Fed to show support here perhaps also outlines the possibility of further monetary support coming along,” Pan added.
The Fed lowered borrowing costs on Tuesday in a bid to protect the world’s largest economy from the coronavirus impact, but the emergency move failed to spur confidence as US equities dropped on worries about a deeper, lasting slowdown.
The dollar touched a five-month low against the safe-haven Japanese yen. Yields on the US benchmark 10-year Treasury fell below 1 percent after the cut, reducing the appeal of the greenback.
Among Asian currencies, the Chinese yuan strengthened 0.6 percent after People’s Bank of China set a firmer midpoint rate.
The South Korean won hit an over two-week high, firming 0.8 percent.
The country’s top financial authorities agreed to take bold, pre-emptive measures, if needed, to tackle economic woes stemming from the coronavirus, an official said.
The Taiwan dollar, Philippine peso and Thai baht advanced between 0.4 percent and 0.5 percent each.
The Thai central bank joined a chorus of monetary authorities promising measures to combat the coronavirus fallout, following the Fed’s emergency cut. The bank said it was closely watching the situation and would act as appropriate.
Data from Malaysia showed a drop in exports in January after they saw a surprise rebound in the previous month.
The ringgit gained 0.2 percent.
Adding to further political tumoil in the nation, its new prime minister delayed the start of parliamentary proceedings by two months, as the opposition sought to challenge his government with a confidence vote. — Reuters
