Most Asian currencies rallied against the dollar on Wednesday, led by a rebound in high-yielders, as investors cautiously took risk in stride ahead of an expected rate cut by the Federal Reserve next week.
The high-yielding rupiah the worst performing currency in Asia so far this year, rose as far as 9,405 per dollar, up about 0.4 percent from late Asian trade on Tuesday. The peso another high-yielder, jumped to 46.7 per dollar, up almost 0.9 percent from Tuesday's close. In Manila, a trader said sentiment improved as stock markets rose and there was no sign of violence as some security officials had feared, after former president Joseph Estrada was found guilty of economic plunder.
Estrada, who remains popular among poor voters, was sentenced to life in prison by an anti-graft court on Wednesday, more than six years after he was ousted from office in an army-backed revolt. "At least there is some finality to the verdict - the reaction so far from the crowd is muted and there is no violence, so it's positive," said the trader.
"We have global markets rallying overnight and we have regional currencies appreciating as well," he added. The high-yielders took the hardest hit among Asian currencies in recent sessions amid concerns about a possible US recession and rising risk aversion.
The Malaysian ringgit, which usually moves in tandem with the high-yielders, rose as far as 3.496 per dollar. MSCI's measure of Asia Pacific stocks excluding Japan edged up 0.35 percent, following a rally in US stocks, as investors positioned for a Fed rate cut on September 18.
Philippine stocks led the pack by rising 1.2 percent. The Japanese yen initially slipped on Wednesday as Japanese Prime Minister Shinzo Abe resigned, but regained ground as the euro hit a record high against the dollar.
Elsewhere, the Singapore dollar hit a one-month high of 1.5155 per dollar, while the South Korean won rose as far as 931.80 per dollar, also a one-month peak. The Indian rupee the regions' top performer this year, firmed as far as 40.45 per dollar, moving closer to its nine-year high of 40.20 hit in July.
"Our call from last week to favour the won and the rupee has paid off," said Emmanuel Ng, currency strategist at OCBC Bank. "Better risk appetite, Asian equities and the lack of urgency from the Fed to cut rates beyond what the market is pricing in are probably whittling away slightly concerns that the US economy may tank, benefiting the regional currencies as a whole," he said.
The US central bank is widely expected to cut the key fed funds rate by at least 25 basis points next week and may cut more this year, but Fed officials have sent mixed messages in recent days.
Investors remain jittery about the turmoil in credit markets, although optimism is rising that a Fed rate cut next week could help boost stock markets and brighten the US growth outlook. Lower US interest rates would not necessarily translate into gains in emerging Asian currencies if the world's largest economy heads into a sharp slowdown, analysts say.
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