SINGAPORE: Most emerging Asian currencies extended gains on Tuesday after Federal Reserve Chair Janet Yellen's cautious comments over possible US interest rate hikes drove investors to seek higher yields in the region.
China's yuan, however, eased as local companies snapped up dollars and the greenback wallowed close to four-week lows, offsetting suspected state-bank intervention to shore up the renminbi. That limited regional appreciation.
"I am inching a bit towards yield-hunting in Asia," said Christopher Wong, a senior FX strategist for Maybank in Singapore, adding he prefers the rupiah and the ringgit.
The South Korean won surged to a near four-week high, tracking earlier moves by regional peers on catch-up demand after the country's financial markets were closed for the Memorial Day on Monday.
Malaysia's ringgit touched a near two-week peak as higher crude prices eased concerns over the country's oil and gas revenues. Indonesia's rupiah hit a three-week high, tracking rises in local stocks and government bonds .
The Indian rupee edged up as the central bank is widely expected to keep its policy interest rate unchanged later in the day.
Yellen on Monday provided little signal on the timing of interest rate hikes, although she gave a largely upbeat assessment of the US economic outlook and said tightening is coming.
Wong from Maybank said the Taiwan dollar could strengthen further due to inflows into local equities, especially after President Tsai Ing-wen took office.
Expectations for an imminent US interest rate rise have waned after surprisingly weak US jobs data. That lifted Asia's high-return bond markets on Monday but concerns over capital outflows and the fate of regional currencies could pose major hurdles to a more meaningful rally.
Wong also expressed caution, given possibilities of the Fed's eventual increases in borrowing costs.
"We don't need to jump the gun. The next week Fed meeting will provide some clues for markets to assess the timing of hikes," he said.
WON
The won jumped 1.9 percent to 1,161.9 per dollar, its strongest level since May 12.
Offshore funds and local traders scrambled for the South Korean currency to unwind bearish bets.
"Some offshore investors pushed down the won too much, looking for only pessimistic factors with market talk that some of them had bought about $4 billion," said a South Korean bank trader in Seoul, adding the won has room to strengthen to 1,140.
Traders hesitated to add more bullish bets on the won with risk seen growing over a central bank rate cut this week.
Reduced expectations for a US interest rate hike may have given the Bank of Korea room for easing in the near-term, analysts and traders said. Central bank policymakers meet on Thursday.
The won also has a chart resistance area around 1,162, analysts said.
RINGGIT
The ringgit rose as much as 0.9 percent to 4.0620 per dollar, its strongest since May 27, as it found further support from higher government bond prices.
The Malaysian currency pared earlier gains, as traders saw Monday's appreciation as excessive.
A weaker yuan also put pressure on the ringgit, traders said.
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