Asia currencies hit 7-month high on ‘Goldilocks' US scenario

Asian currencies rallied to the highest in seven months as ebbing US recession concern, bets on Federal Reserve rate cuts in September and an improving domestic backdrop lifted sentiment in the region.

The Bloomberg Asia Dollar Index gained as much as 0.6% on Monday to the highest since January. The South Korean won and the Malaysian ringgit led the regional advance on upbeat growth prospects and the Thai baht rose on 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 OCBC. “There is room for Asia ex-Japan currencies to recover against a backdrop of developed-market central banks largely on an easing bias.”

The ringgit rose as much as 1.5% to 4.3678 per US dollar, the strongest since February 2023. On Friday, the nation reported a stronger-than-expected increase in second-quarter gross domestic product from the previous year, while global funds poured the most cash into its stock market since June.

The baht extended gains to 34.409 per US dollar, the highest since January, after Paetongtarn Shinawatra on Friday won enough votes in parliament to become the next Thai prime minister.

While her appointment helped to quell concern of a protracted political vacuum after her predecessor was ousted by a Constitutional Court, the currency could face a bumpier path ahead amid reports that the new government may scrap a US$14 billion digital cash handout programme. The relationship between the new government and the Bank of Thailand will also be in focus again due to the new premier’s previous criticism of the central bank.