© Reuters. EM ASIA FX-Most head for weekly gains as Fed rate-cut view weakens dollar
* Most emerging Asian currencies rack up more than 1% weekly gains
* Won on track for best week in over 2 years
* Fed easing signals weaken dollar
* Oil price jump hurts rupee (Adds text, updates prices)
By Rushil Dutta and Renju Jose
June 21 (Reuters) – Most Asian currencies were set for weekly gains against the dollar on Friday, after the U.S. Federal Reserve joined peers in indicating it will cut interest rates to support economic growth.
While the was 1.05% lower on the week, most regional currencies were on track to strengthen more than 1 percent as of 0417 GMT.
The U.S. central bank joined the European Central Bank and the Reserve Bank of Australia this week in signalling the need for more policy stimulus to support growth. Markets now expect the Fed to cut rates as early as next month.
This bodes well for high-yielding currencies such as the Korean won KRW=KFTC which, though marginally lower on the day, was the biggest advancer this week, adding close to 2% against the dollar and clocking its best week in over two years.
Its trade-sensitive peer, the Thai baht THB=TH , firmed 0.5% on the day and over 1% on the week, helped to a degree by recent developments in the U.S.-China trade war. The baht has outperformed its regional peers gaining more than 5% this year.
China has confirmed that President Xi Jinping and U.S. President Donald Trump will meet on the sidelines of the Group of 20 summit in Japan next week, raising hopes of a detente between the two economic super-powers. Talks to reach a broad deal broke down last month after U.S. officials accused China of backing away from previously agreed commitments.
CENBANKS ON HOLD
The Indonesian, Taiwan and Philippine central banks met to discuss policy on Thursday. While Bank Indonesia held rates as expected, its Philippine peer surprised by holding too. Markets had expected a 25 basis point cut.
The Philippine central bank held the rate on its overnight reverse repurchase facility at 4.5%, choosing to adopt a wait-and-see stance to assess the impact of its quarter-point rate cut in May and a phased reduction in banks’ reserve requirement ratio.
Taiwan’s central bank also kept policy rate unchanged, but lowered its 2019 GDP growth outlook amid trade war worries. Indonesia, on the other hand, held its policy interest rate but cut the amount of cash that banks must hold as reserves.
“For BI, the latest move to lower reserve requirement ratio suggests that the central bank is keen to keep an accommodative monetary stance by utilising macro-prudential measures,” Zhu Huani from Mizuho’s Asia & Ocenia Treasury Department said in a note.
A senior official at Indonesia’s central bank told Reuters on Friday that the central bank was “allowing” the rupiah to appreciate against the dollar in line with “quite strong” capital inflows and added that the exchange rate level was “still far from fundamentals”.
The rupiah IDR=ID surged 0.4%, but advances were reined in by a jump in prices on tensions in the Middle East after Iran shot down a U.S. military drone. higher oil prices clobbered the Indian rupee INR=IN , which weakened 0.4%.
CURRENCIES VS U.S. DOLLAR
Change on the day at 0417 GMT
Latest bid Previous day Pct Move Japan yen
+0.21 Sing dlr
+0.01 Taiwan dlr
+0.37 Korean won
Change so far in 2019
Latest bid End 2018
Pct Move Japan yen
+2.33 Sing dlr
+0.52 Taiwan dlr
-1.05 Korean won