Malaysia's ringgit scaled a near three-year high on Tuesday, piggybacking on a rally in the Chinese yuan after the country's central bank announced broad stimulus measures, with equities in emerging Asian markets also clocking modest gains.
The ringgit jumped 0.7% to 4.171 per dollar on Tuesday, its highest since late December 2021. The currency is the best performer in the region since the start of the year and eyeing its best year since 2017.
China's central bank unveiled broad monetary stimulus and property market support measures to boost the world's second-largest economy, sparking a rally in Chinese stocks and the yuan, which jumped to its highest level since May 2023. "The stimulus measures has had an impact to Asian currencies more broadly beyond just the Chinese yuan," said Michael Wan, senior currency analyst at MUFG.
"The currencies which are more linked economically together with China will certainly benefit ... that's sort of in the broader context of why the ringgit has done well today."
Elsewhere, equities in Manila hit a fresh 2-1/2-year-high during trading on the back of the banking and real estate sectors, while Singapore's Straits Times index traded largely unchanged after scaling a fresh 17-year high earlier in the session.
The MSCI gauge of emerging Asian markets jumped 1.2% to its highest level in more than two months. Stocks in Indonesia, Malaysia and Taiwan ticked higher.
The start of the U.S. Federal Reserve's easing cycle has benefited risk-sensitive emerging market assets over the past few weeks, with currencies like the ringgit, Indonesia's rupiah and Thailand's baht appreciating substantially.
However, uncertainties over the coming quarter, particularly from the U.S. election on Nov. 5, have traders on edge over the impact on the emerging market assets.
"Traditionally, EM assets do well during rate cut cycles, though there could be volatility in early stages depending on whether or not we see a corresponding recession along with the rate cuts," ING Chief Economist for Greater China, Global Markets Research Lynn Song said.
"The fourth quarter will likely be more uncertain compared to a strong September, as headlines could be impacted by the U.S. elections, as well as how fast the Fed continues to cut rates moving forward." Currencies largely trended higher, helped by the stimulus measures in China.
The rupiah, South Korean won and Taiwan dollar added 0.2%, while the Philippine peso ticked slightly higher.
HIGHLIGHTS:
** Japan's Sept factory activity slips, PMI shows
** Indonesia launches $941 mln smelter-grade alumina refinery
** Bank Indonesia to cut twice in Q4 as Fed easing shores up FX confidence - Reuters poll - Reuters
