The baht led an advance in Southeast Asian exchange rates as signs the Federal Reserve will delay monetary tightening buoyed demand for emerging-market assets.
The Indonesian and Malaysian currencies pared gains after rising to their strongest levels since at least August following Fed chair Janet Yellen’s remarks to Congress that further interest-rate increases might be pushed back due to global market turbulence.
Higher US borrowing costs reduce the attractiveness of developing-nation assets. A Bloomberg gauge of the greenback versus 10 peers fell to the lowest level since November after Yellen’s comments.
The baht climbed 0.3% to 35.265 a dollar as of 12.12pm and reached the highest level since October earlier, according to data compiled by Bloomberg.
The rupiah advanced 0.2% to 13,443 after rising as much as 0.9% and the ringgit gained 0.1% to 4.1160 after strengthening 0.5% in early trading. The Philippine peso appreciated 0.1% to 47.44.
“Yellen’s remarks pushing back rate-hike expectations and pushing down the odds of hikes near term appear to be the key driver,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank. “The rally may not be sustained as nothing has changed dramatically” and the test will be when Chinese markets reopen on Monday after the Lunar New Year holidays, he said.
Bonds advance
Malaysia’s industrial output rose 2.7% in December from a year earlier, official data released Thursday showed. That surpassed the 1.8% increase in November and the 1% median estimate in a Bloomberg survey.
Bangko Sentral ng Pilipinas will hold its policy rate at 4% on Thursday, according to all 14 economists in a separate Bloomberg survey.
Regional bonds rose, with the yield on Indonesia’s sovereign notes due September 2026 falling three basis points to a nine-month low of 7.97%, according to the Inter Dealer Market Association. The yield on similar-maturity Thai securities declined one basis point to 2.10% and that on 10-year Philippine paper dropped three basis points to 4.04%.
The yield on Malaysian debt dropped six basis points to 3.91%, the most in almost three weeks, Bursa Malaysia prices showed.
Foreign exchange, forex, US economy, Janet Yellen, Federal Reserve, rupiah, peso