Most emerging Asian currencies inched higher against a softer dollar on Monday as an unexpected jump in US employment bolstered hopes for a swift global economic recovery from a coronavirus-induced downturn.
The promising data reduced safe-haven demand for the dollar ahead of the Federal Reserve’s two-day policy meeting ending on Wednesday while bolstering appetite for riskier assets like equities and emerging-market currencies.
South Korea’s won and the Thai baht strengthened about 0.4 percent each, while Taiwan’s dollar gained 0.2 percent.
Several Asian countries have started easing virus-linked restrictions in a phased manner to kick-start their economies after weeks of lockdowns.
However, worries remain about whether this could lead to a new wave of infections and restrictions. Indonesia and the Philippines are two such examples, where curbs in some parts are being eased but case loads are still rising. On Saturday, Indonesia reported its biggest daily rise.
“Given the still-elevated number of fresh daily infections in both countries and the increased likelihood of a second wave of infections, we expect both Indonesia and the Philippines to see a delayed and shallow recovery with economies only returning to form in early 2022,” ING senior economist Nicholas Mapa wrote in a note.
Indonesia’s rupiah weakened 0.4 percent to 13,910 per dollar, while the Philippine peso was flat.
The onshore yuan edged 0.1 percent lower but traded around its strongest level in nearly a month as exports fared slightly better than expected in May.
Market participants are also weighing the likelihood of an escalation in tensions between Washington and Beijing as the US election approaches.
In India, another country gradually easing restrictions, the rupee gained 0.1 percent to 75.540 a dollar.
Minutes of the Reserve Bank of India’s meeting in May showed the central bank was keeping the door open to further easing, calling the pandemic’s economic impact more severe than initially anticipated.
Markets in Malaysia were closed for a holiday.
The rupiah is coming off strong gains made last week which returned the currency to pre-COVID-19 levels.
The sharp rise in recent months, due to the central bank’s efforts to reassure investors attracted to Indonesia’s high-yielding bonds, has led BofA Global Research to say the “exuberance in IDR is unsustainable”.
