SEOUL/KUALA LUMPUR: South Korea’s won and the Malaysian ringgit rose as investors sought out higher-yielding currencies before a speech by Federal Reserve Chair Janet Yellen which may shed light on the outlook for US interest rates.
Markets will parse Yellen’s remarks at a symposium in Jackson Hole, Wyoming Friday after minutes from the US central bank’s July meeting showed divisions within the rate-setting committee on when to tighten.
Fed fund futures show the odds of a hike in 2016 have climbed to 54% from 47% one week ago after Vice Chairman Stanley Fischer last weekend became the latest policy maker to signal an increase by year-end is still under consideration.
“The market’s just trying to get through the whole event risk of Jackson Hole,” said Andy Ji, a currency strategist in Singapore at Commonwealth Bank of Australia.
“But after that, what’s driving the market is back to the search for yield and it’s good for emerging markets in general. We just have to get through the week.”
The won strengthened 0.6% to 1,115.85 per dollar as of 12:17 p.m. in Seoul, according to prices from local banks compiled by Bloomberg.
The ringgit rose 0.1% to 4.0328 per dollar, rebounding from four days of losses, prices from local banks compiled by Bloomberg show.
The MSCI Emerging Markets Currency Index was little changed after recording its biggest one-day drop in two months Wednesday. A JPMorgan Chase & Co gauge that measures the volatility of developing-nation currencies climbed to the highest since July 1.
Among developing-nation markets, Mexico’s peso will be influenced by the outlook for the country’s sovereign credit rating after S&P Global Ratings revised its outlook to negative, according to Bank of Singapore Ltd Crude prices will drive the movements of currencies of oil-exporting nations such as Russia.
“By and large, the market is nervous, because of what the Fed officials have already said,” said Sim Moh Siong, a currency strategist at Bank of Singapore.
“If Yellen takes that line as well, we could see this translating into greater dollar strength.” - Bloomberg.
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