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Korean Won Makes Its Move, Malaysia in Focus and Hong Kong Dollar Still Falling

The Korean won finally made its move yesterday away from the 1130-to-1140 range against the US dollar. The exchange rate for USD/KRW had been trapped between the two prices for much of the previous ten trading days. At the end of yesterday’s New York session – the traditional end of the FX trading day – USD/KRW stood at 1124.30.

Renewed strength in the won has followed the election victory on Wednesday of Moon Jae-in, who succeeds former president Park Geun-hye as South Korea’s leader. Geun-hye was ousted in March and later jailed following a corruption scandal and amid allegations of partaking in cult-like activities.

 

Malaysian Central Bank to Announce Rates

At 7am GMT on Friday, Malaysia’s central bank, Bank Negara Malaysia, will announce their latest decision on interest rates. The overnight policy rate (OPR) is expected to be maintained at 3.0% as the Bank seeks to keep monetary policy accommodative and supportive of economic growth.

In March, year-on-year inflation in Malaysia rose to 5.1%, up from 4.5% in February. March’s figure was the highest since November 2008, although it did fall shy of market expectations for 5.3%.

Although the Malaysian ringgit has clawed back some ground in recent weeks, it has been one of Asia’s worst performing currencies for some time. Among other problems affecting the currency, Malaysia has been engulfed in a unique political and economic scandal – the ‘1MDB’ scandal – and the ringgit has suffered from a divergence in the expectations for monetary policy between the US and Malaysia. The ringgit has heavily underperformed other Southeast Asian currencies over the past 12-months, falling by 7.3% and 3.0% against the US dollar and Japanese yen respectively. By comparison, the Thai baht has gained 2.0% and 6.9% against the dollar and yen within the same period.

In November of last year, Bank Negara attempted to halt the ringgit’s slide by clamping down on the trading of offshore non-deliverable forwards. But because that move lowered interest in Malaysian assets from overseas investors, who found it harder to hedge their FX exposure, later revisions to the forward hedging rules were necessary.

As of writing at 05:55 GMT, the exchange rates for MYR/USD and MYR/JPY stand at 0.2301 and 26.15 respectively.

Yesterday, in their latest FX market commentary, Canadian banking group Scotiabank recommended shorting the MYR/JPY cross with a target of 25.5 and a stop-loss of 26.5. For the layperson, “shorting” or “to go short” are terms used by investors and traders when they place bets on financial markets to fall.

 

No Letup in Hong Kong Dollar Fall



USD/HKD 3 Month Chart

There has been no letup in the rapid decline of the Hong Kong dollar.

As of writing, USD/HKD stands at 7.7918 and, forced by an ever-widening interest rate gap between the US and Hong Kong, has risen in twenty-two of the past twenty-five trading days.

The Hong Kong dollar’s fall is a topic originally covered on BestExchangeRates.com back on April-26.

Although the Hong Kong dollar doesn’t move much in absolute terms – because it has been pegged to the US dollar since 1983 and limited to a USD/HKD range of 7.75 to 7.85 since 2005 – when it moves so quickly and in one direction, as it does now, investors take notice.

In particular, moves in the currency have heightened concerns for the valuations of equities in Hong Kong. It is believed by some analysts that a fall in HKD to 7.8 against USD will prompt selling of Hong Kong shares.

Whether you’re looking to change money into or from Korean won, Malaysian ringgits or Hong Kong dollars, BestExchangeRates.com’s FX comparison calculators for travel money and foreign currency transfers will show you the cheapest place to do this online.

 

 
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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