Asian currencies strengthened on Friday as the dollar languished on fears over a U.S. government shutdown and as China’s strong economic growth figures boosted sentiment in the region.
The U.S. House of Representatives on Thursday passed a bill to fund government operations through Feb. 16 and avoid agency shutdowns this weekend when existing money expires. The bill must still be approved by the Senate, where it faces some uncertainties.
“If a shutdown occurs, history tells us the dollar will sell off marginally in the ensuing weeks but the scope for weakness will be somewhat limited,” said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore.
“We should expect investors to look past Washington contempt regardless of the length of the interruption but apparently from a more risk adverse perspective.”
Analysts said China’s strong economic growth in the fourth quarter of 2017, helped by an export recovery, lifted sentiment toward Asian currencies on the day.
China’s economic growth for the 2017 full year picked up to 6.9 percent year-on-year, the first annual acceleration for the economy since 2010.
China’s yuan was up 0.4 percent after the central bank set its offical yuan midpoint at a more than two-year at 6.4169 per dollar.
The Malaysian ringgit was up half a percent on the day, with technical indictors showing the currency breaking some key resistance levels. The U.S. dollar-ringgit pair broke below its 200-week moving average on Friday.
Strong equities propelled the Taiwan dollar while the South Korean won rose on speculative demand on Friday.
The Thai baht was propped up by dollar sales by exporters.
Overall, most Asian currencies gained against the dollar this week, also helped by strong foreign inflows into the region.
Exchange data showed foreign inflows into Taiwan, South Korea and Indian equities of $792 million, $435 million and $262 million, respectively. —Reuters