Asian currencies show tentative signs of recovery

An employee counts  Malaysian Ringgit banknotes on Nov 14, 2016.
An employee counts Malaysian Ringgit banknotes on Nov 14, 2016. ST PHOTO: MARK CHEONG

Asian markets and currencies inched towards a tentative recovery yesterday after suffering volatility in the wake of Mr Donald Trump's shock victory in the US presidential election last week. But traders warned that the uptick would likely be temporary.

The Singapore dollar strengthened slightly to $1.4111 against the US dollar from $1.4157 on Monday. The rise mirrored similar moves by other Asia-Pacific currencies - South Korea's won, the Australian dollar, Thai baht, New Zealand dollar and Japanese yen all gained against the greenback yesterday.

The Chinese yuan, however, continued to weaken against the US dollar, hitting eight-year lows.

Traders believe the US dollar will continue to climb against emerging market and Asian currencies in the weeks and months ahead.

"At some point, the emotions have to subside and the fundamentals will take over," said Mr Phillip Hagedorn, investments director at ATR KimEng Asset Management in Manila, in an interview with Bloomberg.

"We could see some stability coming in this week, but volatility these days tends to be heightened."

That fine line between stability and volatility was also evident in stock markets across the region yesterday.

Some regional bourses, including Singapore, Hong Kong, Jakarta and Manila, posted gains as investors picked up bargains after recent declines. The local benchmark Straits Times Index climbed 10.28 points, or 0.37 per cent, to 2,797.55.

But others, such as Tokyo, Shanghai and Sydney, continued to fall amid continued tension over what a Trump presidency would hold.

The markets are especially nervous about the US Federal Reserve's next move, which has become harder to read because of the uncertainty.

Moody's Analytics has said Mr Trump's trade and immigration proposals could drive up inflation, which would trigger aggressive interest rate hikes by the Fed. This has led some punters to predict that the Fed will raise rates more sharply than expected at its meeting next month.

Yet, other analysts have said the current volatility in the markets will stay the Fed's hand.

A version of this article appeared in the print edition of The Straits Times on November 16, 2016, with the headline 'Asian currencies show tentative signs of recovery'. Print Edition | Subscribe