Fed Signals Gradual Rate Hike; Asian Currencies Won and Ringgit Gain on Weaker Dollar
Among the Asian currencies, the Korean Won and the Malaysian Ringgit gained vs. the dollar following news that the Federal Reserve plans to adopt a gradual pace in tightening the monetary policy in the country.
It was the strongest gain for won in the last nine months as traders cuts their bets on chances that the Fed will raise key interest rates in this year. Won climbed 0.6 percent to 1,127.13 per dollar in the morning in Seoul. This is the strongest level since October last year when the currency had appreciated to 1,124.02 per dollar.
After officials repeated that "economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate", a measure for the dollar slipped for the third day.
According to a compilation of prices from local banks, the ringgit was up 0.5 percent to 4.0625 per dollar which is nearing its biggest one-day gain in about two weeks.
On Wednesday, when the Fed's two days meeting got over, the central bank kept benchmark rate on hold.
The market does not see any surety that the Fed intends to raise interest rates in the current year. Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore said, "All that the Fed said in sum were 'we'll see'. There was no real capitulation from any commitment to hike this year."