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EM Asia Currencies Fall Following Moderately Hawkish Fed Speak

A rally in the US dollar prompted by moderately hawkish Fed speakers pushed emerging market Asian currencies such as the Thai baht, Philippine peso and Malaysian ringgit lower on Tuesday. Asian currencies from developed economies but which nonetheless remain second tier and under the “emerging” umbrella, such as the Korean won and the Taiwan dollar, also declined.

Charles Evans, President of the Chicago Fed, said on Tuesday that US economic fundamentals are good and that he expects inflation to rise, although he did hint that the Fed could wait until December before raising interest rates again. Evans had said a day earlier that the “current environment supports very gradual rate hikes.”

The Boston Fed President, Eric Rosengren, was also speaking. He told an audience in Amsterdam that “monetary policy is less capable of offsetting negative shocks when rates are already low,” thereby suggesting that higher interest rates may in some way pose less risk to financial stability.

Tuesday’s comments add to those made on Monday by William Dudley of the New York Fed, who expressed confidence that there was a “long way to go” in the current US economic expansion.

With this backdrop, the Philippine peso fell on Tuesday to 50.31 against the US dollar, pushing the USD/PHP rate a long way from the important Head and Shoulders neckline highlighted on BestExchangeRates on June 6th. As of writing, a little after 06:00 GMT on Wednesday, the exchange rate has risen further and is soon to threaten its February and March highs (peso lows) at 50.50.

The Thai baht also fell, pushing USD/THB back above 34 for the first time in six trading days.

Malaysia’s ringgit fell to 4.282 against the dollar following slightly lower than expected inflation data, which came in at 3.9% for the year, down from 4.4% previously and below the market forecast of 4.0%. The currency did, however, gain strongly against the British pound and once again threatens the boundary of its recent trading range at 5.39 in GBP/MYR (close to 0.185 in MYR/GBP). The ringgit benefitted as sterling fell across the board after Bank of England Governor Mark Carney said that “now is not the time” to hike UK interest rates. Carney remains concerned over consumer spending, business investment and what he described as “anaemic” UK wage growth.

The Indian rupee fell to reach 64.66 against the dollar on Tuesday. Having strengthened more than 6% between late January and late April, the rupee is now trading sideways, which is not unexpected given the currency’s strong seasonal characteristics. The rupee typically falls in value every second-quarter (April-to-June) due to India’s heightened gold demand heading into the Hindu festival of Akshaya Tritiya. It appears that seasonal factors have so far been sufficient to halt the rupee’s 2017 climb. The currency had strengthened enough to push USD/INR marginally below 64.0 in late April and mid-May.

In other Asian market news, the Korean won also fell to a two-month low. USD/KRW reached 1142.80.

As always, readers can change money into or from any of the aforementioned currencies at exchange rates far better than those available at a typical bank or Bureau de Change by using BestExchangeRates’ online comparison calculators for travel cash and foreign currency transfers.

Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.

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