Asian currencies gain a third week on rising rates, US economic risk

Asian currencies gained for a third week on speculation regional central banks will keep raising interest rates to stem inflation, boosting the yield advantage on local assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active currencies, climbed 0.2 per cent for the week as demand for the dollar waned after Moody’s Investors Service said the US risks losing its top credit rating. The Thai baht had the best week in more than a month after the central bank lifted benchmark borrowing costs on June 1 to 3 per cent, the fourth increase this year. That compares with 1.25 per cent in the European Union and a maximum 0.25 per cent in the US.

The Dollar Index dropped 0.8 per cent this week to 74.373, before a US Labor Department report showed slowing job growth. Malaysia’s ringgit climbed 0.7 per cent to 3.0120 per dollar in Kuala Lumpur, Taiwan’s currency advanced 0.5 per cent to NT$28.750 and the baht rose 0.2 per cent to 30.33.

“The Moody’s report changes the ballgame and shifts investors’ focus from Europe to the US,” said Suresh Kumar Ramanathan, a foreign-exchange strategist at CIMB Investment Bank Bhd in Kuala Lumpur. “The ringgit is holding firm because of the knock-on effect from the dollar weakness.”

Moody’s said on June 2 America’s Aaa rating may be cut should there be “no progress” on lifting the $14.3 trillion debt limit along with efforts to cut the budget deficit.

US JOBS
Employers in the US added a less-than-projected 54,000 jobs in May after a revised 232,000 gain in April, according to Labor Department figures yesterday. The median forecast in a Bloomberg News survey was for payrolls to rise 165,000. The US jobless rate climbed to 9.1 per cent in May.

A report from ADP Employer Services on June 1 showed companies added 38,000 workers, less than the 175,000 predicted in a separate Bloomberg survey.

The Bank of Thailand lifted its one-day bond repurchase rate by a quarter of a percentage point this week after inflation accelerated to a 32-month high of 4.19 per cent in May. Rates remain “low” and the pace of tightening is “still appropriate,” Assistant Governor Paiboon Kittisrikangwan said after the policy meeting.