Asian currencies are set to rally further in the coming weeks as the negative impact on the dollar by the US jobs report on Friday is likey to continue.
The Singapore dollar rallied to a 1-month high against the greenback immediately after the report, making a sharp 1.45% jump on the day. The USD/SGD pair ended Friday at 1.3567, its weakest close since 3 May.
The development is likely to upset the Monetary Authority of Singapore (MAS) as it needs the Singdollar weaker for boosting growth through increased exports.
In mid-April, the MAS had taken specific steps to arrest appreciation of the local dollar which was then trading near an 8-month high.
Department of Labour said on Friday that total nonfarm payroll employment in the US increased only 38,000 in May, which was its lowest addition in five years.
The May figure was also compared to a downwardly revised 123,000 in the previous month and well below market expectations of 164,000.
In fact a group of a Federal Reserve officers including its Chairperson Janet Yellen had boosted the greenback over the past few weeks through hawkish comments, attracting investors to position for a stronger dollar.
On 27 May, Yellen said: "It's appropriate – and I have said this in the past, I think – for the Fed to gradually and cautiously increase our overnight interest rate over time."
The US currency was also boosted by the upward revision in the US GDP data for the first quarter but the currency has taken a U-turn after the May jobs data.
The greenback has dropped to a 20-day low against the euro following Friday's data.
The Malaysian ringgit rebounded from a 3-month low of 4.17/USD to 4.09. The Thai baht strengthened to 35.36 from 35.61 and the Chinese yuan edged up to 6.5643 from 6.5820.
Most Asian currencies had been under pressure over the past several weeks thanks to the dollar boosting comments and data points from the US and that was a relief for the region amid softer economic conditions globally.
Now that the jobs data has reversed the picture, the market will be looking for additional data and policymaker comments from the world's largest economy for further cues.
The immediate gains in the local units were largely due to speculative trading ahead of the report or in thin market during the US hours. Therefore, Monday's action is to be watched for measuring the true impact of the news.