Asian currencies rose on Tuesday as markets shrugged off record high oil prices to focus on regional stock markets, which hit multi-year highs, and data showing the US manufacturing sector was expanding. The Korean won and Thai baht led the pack, gaining over half a percent each.
The won stalled near 1,020 a dollar after verbal intervention from the Korean authorities warning against its rise against the yen.
"What has been so impressive about this rally in Asia is that it comes in spite of higher oil prices and it seems to me that the equity side is gaining further traction," said Claudio Piron, a currency strategist with J.P. Morgan Chase in Singapore.
"It comes in spite of robust US economic data," he said.
The dollar failed to benefit from strong economic growth and manufacturing data, ceding ground to the euro on market suspicion that central banks were diversifying reserves into the European currency.
Analysts said the rise in the import component of the US manufacturing index was a positive for Asia, since the United States is Asia's biggest export market.
Oil hit another record high on Monday and that weighed on regional currencies, but not enough to offset the impact of rising stock indices around Asia.
Tokyo's benchmark Nikkei average hit its highest level in over a year, Hong Kong's Hang Seng rose to a 4-1/2-year peak and MSCI's index of non-Japan Asian shares rose to its highest in eight years.
The Chinese yuan closed higher for the fourth session at a post-revaluation closing high of 8.1032.
But it has risen only 0.08 percent from the 8.11 level China revalued the currency to on July 21.
Piron said the yuan was underperforming other regional currencies.
"We are only about 10 basis points away from where the renminbi was against the basket of currencies after its revaluation. In effect, the renminbi has been losing ground," he said.
He estimates China's new regime pegs the yuan to a basket comprising 55 percent US dollars, 20 percent euros, 15 percent yen and 10 percent other currencies.
The Thai baht rose to a 10-day peak of 41.27 per dollar after data showing a sharp rise in consumer price inflation raised expectations of further Bank of Thailand (BOT) rate rises.
Simon Flint, head of Asian currency strategy at Merrill Lynch, said the baht was also mirroring a rally in other Asian currencies, driven by the improving global growth outlook.
"The feeling is that we have reached the trough in the economic cycle in Asia and things are going to improve from here," he said.
The baht is emerging Asia's worst performer this year, having shed 6 percent since January as Thailand's trade account deteriorated.
The June trade deficit was the biggest in nine years.
Thailand released inflation data on Monday showing consumer prices in July rose at their fastest pace in nearly seven years.
"The baht has been knocked around a lot and people looking for value in Asia are selling dollar/baht," Flint said.
"The BOT is one of the most aggressive central banks in the region with regard to interest rate policy and yesterday's inflation numbers have caused some people to ratchet up their expectations for Thai interest rates, which, at least in the initial instance, will be supportive for the currency."
Thailand has raised rates six times since last August.
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