KUALA LUMPUR • Malaysia's ringgit and the Indonesian rupiah extended the longest bout of gains since at least 2011, a test of sentiment for emerging-market assets amid a rebound in commodities and stocks.
With relative-strength indicators pointing to overbought territory for both developing-nation currencies and equities, the question is how long the momentum can be sustained.
A key determinant will be this week's European Central Bank meeting, which has hinted it may add to its monetary stimulus on top of negative interest rates, policies that could boost cash in the financial system and feed demand for higher-yielding assets elsewhere.
The Australian dollar retreated yesterday after China's expanded deficit target disappointed some in the market expecting a more aggressive stimulus signal from Australia's largest trading partner, National Australia Bank said.
It was at 74.11 US cents as of 6.45am in London (2.45pm Singapore), down 0.4 per cent from Friday, when it touched 74.43, the most since July.
There's a better environment for risk, which is helping sentiment for currency markets in region.
MR MITUL KOTECHA, head of Asian foreign-exchange and interest-rate strategy at Barclays in Singapore.
It has gained 4.9 per cent in the past month.
Traders will watch for comments from Reserve Bank of Australia's deputy governor Philip Lowe today for signs that the currency's strength is beginning to trouble policy-makers.
Brent crude climbed towards US$40 a barrel, a level last breached in December, and a sign the global outlook is improving after the US reported jobs data that beat estimates.
Meanwhile, the ringgit advanced for an eighth day and the rupiah for the 13th, with Indonesia's Coordinating Minister for Economic Affairs Darmin Nasution saying last Friday that the government does not want its currency to strengthen above fundamentals.
The rupiah is leading emerging-market gains this year, along with the Brazilian real and the ringgit, which have all climbed in the region of 5 per cent.
Malaysia's currency rose 0.8 per cent to 4.0893 a dollar as of 1.08pm in Kuala Lumpur, and touched its strongest level since August, according to data from local banks compiled by Bloomberg. The rupiah appreciated 0.7 per cent and the real 1.2 per cent, taking its gain to a fourth day.
"There's a better environment for risk, which is helping sentiment for currency markets in the region," said Mr Mitul Kotecha, head of Asian foreign-exchange and interest-rate strategy at Barclays in Singapore.
"Oil's been rallying and generally, some of the major concerns we saw earlier in the year seem to be receding at least for now."