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Korean won rises with Malaysian ringgit as Fed seen holding fire

Wednesday, September 7, 2016 - 10:22

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South Korea's won jumped the most in a month and the Malaysian ringgit climbed as disappointing US services data reined in bets the Federal Reserve will tighten policy in September.

[KUALA LUMPUR] South Korea's won jumped the most in a month and the Malaysian ringgit climbed as disappointing US services data reined in bets the Federal Reserve will tighten policy in September.

The odds for a Fed interest-rate hike this month fell to 24 per cent, from 36 per cent a week earlier, after a report Tuesday showed the Institute for Supply Management's services gauge dropped to a six-year low in August. The Bloomberg Dollar Spot Index had its worst day in almost six weeks and US Treasury yields fell after the data.

"Weak US ISM non-manufacturing with soft details is debilitating the odds of a September hike," said Vishnu Varathan, a senior economist in Singapore at Mizuho Bank Ltd.

"The attendant pull-down in Treasury yields is accentuating the allure of Asian currencies."

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The won strengthened as much as 1.2 per cent to 1,092.35 per US dollar, its biggest intraday gain since Aug 10, and traded at 1,094.68 as of 10:11am in Seoul, according to prices from local banks compiled by Bloomberg. The ringgit appreciated 0.6 per cent to 4.0595 per US dollar, on course for its biggest one-day gain in a month.

Bank Negara Malaysia will keep the overnight policy rate at 3 per cent at a review on Wednesday, according to 16 of 19 economists in a Bloomberg survey before the decision scheduled for 3pm local time. The rest expect a 25-basis point reduction.

A government report due at noon is forecast to show the nation's exports rose 1.9 per cent in July from a year earlier, after increasing 3.4 per cent the previous month, according to a separate survey.

South Korea's 10-year sovereign notes rose for a third day, pushing the yield down four basis points to 1.47 per cent, according to prices from local banks compiled by Bloomberg.

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