Most emerging Asian currencies rose on Monday amid hopes for stimulus moves by the Federal Reserve and steps by the European Central Bank to tackle the debt crisis, while weak economic data in Asia raised expectations for easing in the region. The Malaysian ringgit outperformed regional peers on catch-up plays, while inflows and exporters supported the South Korean won and the Taiwan dollar.
Thai exporters lifted the baht. Going against the trend, the rupiah fell even though Indonesia reported a surprisingly narrower trade deficit in July, thanks to slower-than-expected imports. Traders said the fall was due to bond outflows. The strengthening of other Asian currencies came as regional stocks rose after Fed Chairman Ben Bernanke kept the door open for more easing if needed.
On Friday, Bernanke said stagnation in the US labour market was a "grave concern," although he stepped short of providing a clear signal of imminent action. "Bernanke did sound more dovish pointing to a higher chance of QE3, so risk assets are supported" said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong, referring to a possible third round of the Fed's quantitative easing, or bond buying programme.
The ringgit tried to clear 3.1120 per dollar, the 50.0 percent Fibonacci retracement of the local unit's depreciation in late August on catch-up buying. Malaysian financial markets were closed for a holiday on Friday when most Asian peers gained.
But local interbank speculators hesitated to lift the ringgit further around 3.1100, its strongest on August 28 and August 29. The won strengthened past the 50.0 percent retracement at 1,131.1 per dollar of the South Korean currency's weakening last month. The won failed to touch the 61.8 percent retracement at 1,129.4 as importers bought dollars. "We need to see if the Fed moves or not later this month. Until then, I don't think the won would rise much further," said a senior foreign bank dealer in Seoul. The Taiwan dollar advanced on some inflows from foreign financial institutions backed by expectations of a QE3 by the Fed.
The baht gained on exporters' demand for settlements and as the Singapore dollar recovered earlier losses. The Thai currency faced technical resistance at a 200-day moving average, which currently stands at 31.218 per dollar. The rupiah fell as foreign banks sold the Indonesian currency, which dealers said was linked to bond outflows. The central bank was spotted selling dollars to prevent the rupiah from weakening past 9,600 per dollar, dealers added.
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