Ahead of major announcements in the coming days, investors were in surprisingly good spirits on Wednesday, indicated by a stronger New Zealand dollar, won, rupee and a faltering yen.
Weakness in Asia-Pac FX would have been forgiven ahead of Thursday’s announcements by the FOMC (Wednesday in the US and Europe), Bank of England and Donald Trump, who announces his decision on the next Federal Reserve Chair; not to mention Friday’s US payrolls data.
Currencies in the Asia-Pacific region made sweeping gains against the euro on Thursday night after the European Central Bank announced a cautious approach to the removal of monetary stimulus.
Further to a zero percent interest rate, the ECB is currently buying €60 billion worth of assets (bonds) each month, with the goal of keeping eurozone borrowing rates extremely low.
The South Korean won climbed to a seven-week high against the dollar on Wednesday (a USD/KRW low) of 1123.3 after third-quarter GDP data showed South Korea’s economy growing at its fastest pace in seven years. Third-quarter growth of 1.4% was well above the median estimate of 1.0% and an improvement on second-quarter expansion of 0.6%.
The hearts of those holding Philippine pesos were broken on Tuesday after the currency slipped to its weakest level against the dollar in more than eleven years. The peso weakened by 33 centavos to 51.85 per dollar.
The peso wasn’t alone in falling against the dollar; most Asia-Pac currencies did the same as the greenback shrugged off more Republican disharmony – seen as a potential obstacle to US tax reforms – late in the New York session.
Shinzo Abe’s Liberal Democratic Party was the decisive winner in this weekend’s Japanese election, paving the way for a continuation of “Abenomics” and extremely loose monetary policy in the world’s third largest economy. Consequently, the Japanese yen weakened on Monday to levels above 114 per dollar for the first time since July.
For Asia-Pac currencies, Thursday’s session was dominated by political nervousness in New Zealand and a busy economic calendar.
In terms of data, Japan kicked things off a little before 9am in Tokyo with the country’s latest trade figures. Export growth of 14.1% in the year to September matched market expectations, more or less.
The week ahead should be an interesting one for Asian financial markets, with the highlights being China’s 19th National Congress, the latest numbers for Chinese economic growth, the Bank of Korea’s monetary policy meeting and Japanese trade data.
Further to that, and to the events outlined below, investors should look with care to Federal Reserve speakers on Sunday and Wednesday (Asian time zones) and to Tuesday’s US data for industrial production, all of which may influence risk appetite and, of course, the dollar side of Asian FX pairs.
With the unsurprising exception of the Philippine peso – Asia’s worst performing currency of the year – Asia-Pac’s most actively traded currencies made gains against the US dollar on Tuesday.
Although limited, gains were somewhat easy to come by as risk appetite returned after the President of Catalonia, Carles Puigdemont, held off on formally declaring the region’s independence from Spain, and by doing so, stepped back from what had looked like the precipice of a constitutional crisis in Europe’s fourth largest economy.