Most of the Asian currencies have edged back up again after months of being in a slump compared to the greenback currencies which according to healthy US jobs report have lowered cautiousness in the US economic recovery.

Economists’ estimations of the condition of the US job market were beaten by recent job reports, indicating that the US economy is heading in the right direction, denying previous murky economic forecasts.

Frances Cheung, a strategist at Credit Agricole CIB in Singapore, said “Sentiment was boosted by the decent US data, which suggests the recovery may be gaining some traction.”

Strengthened currencies send out a strong signal that their economies will remain strong in terms of growth rate and other parameters like liquidity position; expanding scope for investors to park their net worth. Investor sentiments flows with situation, turning investment activity low when economic prospects are weak and gears up with brighter prospects.

Recently, foreign investors pushed $600 million into stock markets in Taiwan, India, and Thailand, according to Bloomberg. This pushed the markets up. Currency Analyst Jonathan Cavenagh at Singapore-based Westpac Banking Corps said “the better data tone is allaying fears the global economy was going to roll off the cliff.”

In the last five months, Indian rupees surged 0.7 percent to 51.8174 per dollar, following reforms in the retail sector and strong foreign fund inflows, while currencies of other Asian countries like the Philippine peso jumped 0.7 percent to 41.42, Malaysian ringgit rose close to 0.5 percent and Thailand baht advanced 0.8 percent.

South Koran won erased its losses last week against the US Dollar reaching 1,111.4 per dollar since November 2011 while Taiwan’s dollar upped itself merely 0.1 percent.

Currency fluctuation speaks lots about a country’s financial health, trade balance and growth rate. A currency which loses its value against international currencies is the symbol of prevailing illness in the economy while currency regaining considerable strength symbolizes brighter prospects for the country.

Tsutomu Soma, manager of the investment trust and fixed income business unit at Rakuten Securities Inc., said “With global central banks introducing measures to support their economies, risk sentiment is improving.” Mr. Soma further said, “Developed nations will keep interest rates low for a long time and that makes higher yields, offered by emerging countries attractive.” 

Opening of the retail sector for foreign investment played a formidable role in turning India into a hot destination for investment again. This has lead to robustness in the Indian rupee, also divestment and allowing overseas airlines to invest in domestic carriers has solidified the currency.

Increased concerns by central banks and high hopes of constructive intervention by investors in Asia, with easing fears of US economy weakening again, has helped to boost investor confidence in many Asian countries.

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About the author

Muhammed Faraaz
Post-graduate in Economics from India, unfolding complexities and policies. Proponent of Classical Economics.