Asian currencies soar to highest level in 7m

Asian currencies surged to their highest levels in seven months on Monday, buoyed by a combination of factors including easing US recession fears, anticipation of Federal Reserve rate cuts, and improving domestic economic conditions.

The Bloomberg Asia Dollar Index climbed by as much as 0.6 per cent, reaching its peak since January.

Leading the charge were the South Korean won and Malaysian ringgit, which benefited from positive growth prospects. The Thai baht also appreciated amid easing political tensions.

“It feels like a Goldilocks scenario, where US recession fears fade while growth momentum in the region remains moderate,” said Christopher Wong, a foreign-exchange strategist at Oversea-Chinese Banking Corp.

The Malaysian ringgit strengthened by 1.5 per cent to 4.3678 per dollar, its strongest level since February 2023. This followed a better-than-expected 2nd quarter GDP growth and a significant inflow of foreign funds into the stock market.

Thailand’s baht extended gains to 34.409 per dollar, the highest since January, after Paetongtarn Shinawatra secured enough parliamentary votes to become the next prime minister.

Goldman Sachs lowered the probability of a US recession to 20 per cent from 25 per cent, citing positive economic data. The firm also anticipates a 25-basis point interest rate cut by the Fed in September.

This reduced recession risk benefited export-oriented Asian economies. The South Korean won surged 1.5 per cent to its highest level since March, and the Philippine peso rallied 1 per cent to its strongest point since November.

The Japanese yen appreciated by 1.2 per cent as investors awaited clues from Bank of Japan Governor Kazuo Ueda on the central bank’s monetary policy path.

The Bloomberg Dollar Spot Index declined by 0.3 per cent as traders focused on Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium for further rate cut indications.

Regional equities also experienced gains, with the MSCI Asia Pacific Index rising nearly one per cent to its highest level in a month.

Attribution: Bloomberg

Subediting: M. S. Salama