Most Asian currencies ticked higher on Monday, with China’s yuan leading the pack on a firm midpoint rate fix by the central bank and robust demand ahead of a week-long New Year holiday.
The onshore yuan gained 0.2 percent to 6.85 against the dollar, its strongest since early July.
“The strengthening of Chinese yuan continues to be an anchor for Asian currencies…
Seasonal demand for the yuan in light of the Chinese New Year holidays has kept it resilient against the greenback,” wrote Jingyi Pan, a market strategist at IG.
The yuan may well sustain its strength in the early part of the week, though some profit-taking towards the end would not come as a surprise, Pan added.
Chinese markets will be closed between Jan. 24 and 30 on account of the Lunar New Year.
Meanwhile, a status quo in a key lending benchmark rate for the second month in a row, and positive sentiment over firm data and a recently struck trade deal with the United States also helped the market.
The People’s Bank of China set the midpoint rate – onshore yuan can trade 2 percent on either side of the fixing – at a six-month high prior to the open.
Riding the yuan’s coattails, most regional currencies managed to eke out small gains despite the dollar standing firm against a basket of currencies.
A Reuters poll showed export orders likely rose for the first time in 14 months, amid signs of a rebound in demand for electronic gadgets and fading concerns over the protracted US-China trade spat.
Central bank meetings will also stay in focus across the week. The Bank of Japan, the Bank Indonesia, and the Bank Negara Malaysia are all expected to stand pat on rates, although their commentaries will be closely watched for indications of further cuts.
Meanwhile, the Malaysian ringgit inched 0.1 percent lower as a diplomatic spat with India continued to threaten the country’s important palm oil exports.
Prices fell 9.5 percent last week after India effectively halted imports from the world’s second-biggest producer following a row over criticisms by Malaysia’s prime minister over India’s new citizenship law and actions in Kashmir.
Elsewhere, the Indian rupee and the Philippine peso both shrugged off a jump in crude prices to stand little changed. — Reuters
