Emerging Asian currencies strengthened on Friday as the dollar weaknened, while benchmark bond yields in several countries fell on hopes that the US Federal Reserve might slow or even pause its tightening cycle later this year.
Yields on Indonesia’s historically high-yielding debt fell to 7.118 percent, its lowest since May 9, while the yield on Malaysia’s benchmark 10-year note hit its trough since mid-April.
Minutes from the Fed’s May meeting, released Wednesday, showed most participants believed 50 basis-point hikes would be appropriate at the June and July policy meetings, but many thought big, early hikes would allow room to pause later in the year to assess the effects of that policy tightening.
“Lower US yields and a weaker dollar are generally conducive for inflows into emerging market portfolio assets,” said Mitul Kotecha, head of emerging markets strategy at TD Securities.
“There are certainly some temporary signs of a return of flows into Asia’s bond and equity markets and that is helping currencies,” he added.
South Korea’s won firmed 0.9 percent to its highest in a month, while the Indonesian rupiah, Taiwanese dollar and Malaysian ringgit were up between 0.4 percent and 0.5 percent.
Stocks in Asia were also on track to close the week on a strong note, buoyed by an overnight relief rally on Wall Street, with investors taking comfort from strong results for regional technology firms and US retailers.
Taiwan shares jumped 1.9 percent, recording their best session since mid-March, while shares in Jakarta gained 1.7 percent to hit their highest since May 9.
The yuan, which has underperformed among Asia currencies this week, was flat, as new data highlighted the challenges confronting the country’s economy.
Profits at China’s industrial firms fell at their fastest pace in two years in April as high raw material prices and supply chain chaos caused by COVID-19 curbs squeezing margins and disrupted factory activity.
