The South Korean won and Malaysian ringgit led a broad Southeast Asian currency rally on Wednesday as Chinese and Indian data revived appetite for risk assets, sending stocks in the region higher. China's manufacturing sector regained some momentum in August while India continued to power ahead, cheering investors in the face of signs that a sputtering US recovery was cooling global demand.
Asian stocks rebounded from a sell-off a day earlier as investors were encouraged by rises in Chinese PMI indexes. The MSCI index of Asia Pacific stocks outside Japan gained 1.53 percent by early afternoon. The South Korean won rallied as investors to cleared long dollar positions to cut losses in the face of higher stocks. An upward revision to the country's trade surplus forecast for 2010 also supported the won, dealers said.
The won was quoted at 1,184.4 per dollar against its 1,198.1 close. Doosan Heavy Industries won a $1.46 billion contract to build a freshwater generator plant in Saudi Arabia, raising expectations for more won demand. Investors remained reluctant to buy the won aggressively at the current level as importers may need dollars for settlement.
"Despite firm stocks, players are likely to prefer dollars on dips when the won strengthens past 1,190, given the recent mood," a foreign bank dealer said. Seoul shares rallied but foreign investors remained net sellers. The Malaysian ringgit rose half a percent to 3.1340 per dollar in active trade with local exporters leading a dollar sell-off. Its rally came as investors chased risky assets in reaction to the data showing a rebound in China's manufacturing sector after it slowed for several months.
"Offshore was mainly a net buyer of dollar/ringgit earlier but turned sellers after the China PMI," a trader said. "Foreign fund inflows are still steadily coming into Malaysian FX, stock and bond markets. We see a lot of bond flow today and NDFs are well bid this morning."
Ringgit forwards moved in tandem with spot. Three-month dollar/ringgit NDFs were bid at 3.1480 at 0602 GMT, up from 3.1630 at Tuesday's close, pricing in three-month ringgit depreciation of 0.4 percent. The ringgit, the top performer in emerging Asia, has gained 9.2 percent against the dollar so far this year.
The Thai baht extended gains in early moderate trade, hovering around major resistance at 31.20 per dollar, with the Bank of Thailand making only tentative efforts to slow its rise. Dollar/baht was bid at 31.15 at 0605 GMT, up more than a third of percent from 31.26 late on Tuesday. The baht has gained 7.0 percent against the dollar this year, trailing only the yen and ringgit among Asian currencies.
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