TOKYO: Emerging market currencies soared on Thursday with the South Korean won rising at its sharpest rate in four years after the Federal Reserve lowered its forecasts for US interest rate hikes this year.
In a statement following the Fed’s latest policy meeting, bank boss Janet Yellen cited concerns about the impact on the US economy of recent turmoil in global markets, weakness in China and Europe and the plunge in oil prices.
The comments came after the Fed said it saw a slower pace of rate rises than foreseen in December, when it announced its first hike in almost a decade.
While the decision to leave the key federal funds rate unchanged was expected, Yellen’s softer-than-expected tone surprised markets, sending the higher yielding currencies up against the dollar.
“The Federal Reserve has inspired Asian markets today,” Chris Weston, Melbourne-based chief market strategist at IG, wrote in a commentary.
“Clearly, when the Fed are concerned by heightened global risk and persistently low inflation expectations, the result is traders reaching for the buy button.”
Around 4 a.m. local time, the won led gains against the greenback, surging 1.72 percent—its sharpest jump since 2011.
The oil-linked Malaysian ringgit soared 1.36 percent as crude prices jumped, while Indonesia’s rupiah rose 1.11 percent. The Thai baht and Taiwan dollar also booked healthy gains.
“In the very short term, risk currencies . . . will do well as other risk assets including stocks and oil benefit from the Fed’s dovish stance,” Mansoor Mohi-uddin, senior markets strategist at Royal Bank of Scotland Group, told Bloomberg News.