Asian currencies edging ahead, waiting for yen move

Asian currencies retained their stronger tone on Tuesday, but were waiting for a sustained yen rally before making substantial moves.
Signs of domestic recovery in Asian economies and a calming of political tensions in Taiwan were helping sentiment. Risk appetite was also returning after the shock of the deadly Madrid bombings, analysts said.
"The domestic recovery story is gaining ground, and broader-based growth in Asia is seen to probably dampen the hands of central banks to intervene to ward off domestic currency strength," BNP Paribas currency strategist Thio Chin Loo said.
Speculation that Japan may be winding down or ending its policy of massive intervention to stop the yen from strengthening added to the upbeat tone in regional currencies.
The yen was trading around 105.50 per dollar, and analysts said a break to multi-year highs past 105 per dollar would likely pull other Asian currencies higher as well.
Still, ahead of the end of the Japanese fiscal year on Wednesday, there has been some repatriation of funds from Asian markets and reports of thinner trading volumes.
The Singapore dollar strengthened to five-week highs near $1.6840, keeping an eye on the yen which it follows closely, to be the strongest regional in morning trade.
Some analysts estimated the Singapore dollar to be near the top of the trading band it is managed in, ahead of a policy review by the Monetary Authority of Singapore in April.
The Singapore dollar is managed against an undisclosed trade-weighted basket of currencies. Last July, Singapore eased policy by lowering the centre of the trading band.
The Taiwan dollar extended Monday's gains as the political situation remained calm ahead of an expected recount of votes in the disputed March 20 election.
In local trade it rose to its highest level since February 18 as the stock market rose about 0.7 percent after Monday's 5.6 percent rise.
"People are trying to look beyond politics now and basically assess what the implications on the economy are," Thio said.
"Numbers we've seen of late, such as export orders, industrial production and the leading indicators, certainly point to a recovery in the Taiwan economy."
Politics remained a factor in other markets, with elections coming up in Korea, Indonesia and the Philippines.
Beyond the end of the month, traders were looking for direction from Japan's tankan survey of corporate sentiment on Thursday, the meeting of the European Central Bank also on Thursday, and the US employment report on Friday.
Speculation of an ECB rate cut has raised some questions about the strength of the global recovery, and disappointing US data could provide the spark for the yen to rally.