Asian currencies rose on Wednesday as strong manufacturing data from China coupled with a risk-happy market environment spurred interest in emerging currencies, with the Chinese yuan jumping to its highest in six-and-a-half months. The Chinese yuan shot up as trading resumed following an extended weekend, rising about 0.4 percent against the dollar. The currency posted its biggest intraday percentage gain in over four months.
Yuan stands to gain around 1 percent in May after shedding about 0.2 percent in April. Trading in other currencies however was in a tight range as some investors held back in anticipation of US wage data coming in this Friday. "Growth has remained decent globally, with the Chinese PMI data being better than expected," said Nizam Idris, head of strategy, fixed income and currencies at Macquarie Bank.
"Its an environment that's quite conducive for risk taking." The US wage data could affect yields and markets will look to this data as a trigger, Nizam said. The offshore yuan firmed sharply after Hong Kong's overnight yuan borrowing rate jumped to its highest point in nearly five months. The Chinese manufacturing and services sectors grew faster than expected in May as activity in the steel industry rebounded, assuaging fears of slowing economic momentum.
The South Korean won rose about 0.5 percent against the dollar, snapping three straight sessions of losses. The won saw moderate support from exporters' end-month dollar-selling, but remained confined to a tight trading range as investors awaited upcoming economic data. The won is on track to gain about 1.5 percent in May. The Indian rupee gained nearly 0.2 percent against the dollar on Wednesday, snapping two consecutive days of losses. It stands to lose about 0.5 percent in May.
"The south-west monsoon rains reached southern Kerala coast and Northeast India simultaneously on Tuesday. An early arrival of monsoon will bring added optimism to India's stock markets," said Scotiabank in a note. India is also scheduled to release GDP data for the first quarter of 2017 later on Wednesday, with a median forecast from a poll of 35 economists showing the economy grew 7.1 percent annually.
The Singapore dollar fell as much as 0.18 percent on Wednesday before stabilising at near flat levels. It stands to gain about 0.86 percent this month. "There's a lack of domestic drivers here," said Nizam. "A positive risk appetite environment doesn't benefit the Singapore dollar too much as it has really low yields." Ratings agency Moody's changed its outlook to 'stable' from 'negative' for Singapore's banking system, citing improving growth, receding risks to asset quality and profitability.
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