Most Asian currencies edged up as weak US economic data renewed hopes that the Federal Reserve will resume making rates cuts to prop up growth rate in the United States.
Soft manufacturing and employment data from the United States has cemented signs of a slowdown in the world’s largest economy, while Washington on Wednesday announced new tariffs on imports from Europe, which could draw a tit-for-tat response.
Sim Moh Siong, FX strategist at Bank of Singapore, said increasing fear of a global slowdown has generated hopes the Fed “might step up to the plate in providing more rate cuts”.
The Fed’s next policy meeting is at the end of October.
Bets on a rate cut, which have increased, could rise further if US September non-farm payrolls due later on Friday shows weakness in the labor market.
On Thursday, the Thai baht strengthened most among regional currencies, tacking on 0.3 percent.
A current account surplus and strong foreign reserves have helped the baht, Asia’s best performing currency, but extended strength in the unit has put pressure on the export-reliant economy and prompted central bank moves to curb inflows.
Malaysia’s ringgit and the Philippine peso both advanced 0.2 percent against the greenback.
Singapore’s dollar inched up 0.1 percent. The city-state is especially sensitive to trade war frictions, and analysts increasingly see substantial policy easing ahead.
“Current macro conditions are as weak, or weaker, than when the MAS (Monetary Authority of Singapore) has reduced the slope or re-centered the midpoint of the band in the past … A large policy easing is most likely,” said Societe Generale in a note.
Eleven economists polled by Reuters late last week all expect the Monetary Authority of Singapore (MAS) to loosen policy at a meeting due no later than Oct. 14.
Chinese markets remained closed for a National Day holiday until Oct. 8, while South Korean financial markets were shut for a holiday on Thursday. – Reuters