Most emerging Asian currencies rose on Thursday after an upbeat reading on China's factory sector and as the Federal Reserve signalled it was not ready to raise interest rates any time soon. Regional currencies started the day slightly firmer as minutes of the Fed's April meeting showed there was no sign of a rate hike soon, though policy makers had started laying the groundwork for an eventual exit from their easy stance.
Asian currencies extended gains after a preliminary HSBC survey showed China's factory sector turned in its best performance in five months in May. The HSBC Flash China Manufacturing Purchasing Managers' Index (PMI) recovered to 49.7 in May from April's final reading of 48.1, beating a Reuters' poll forecast of 48.1 but still contracting slightly.
The Malaysian ringgit hit its strongest in more than six months as offshore hedge funds bought non-deliverable forwards (NDFs). South Korea's won rose on demand from exporters and continuous stock inflows. The Taiwan dollar advanced thanks to corporate bids. The Thai baht gained as investors kept covering short positions on hopes of an end to A prolonged political crisis which some economists fear could push the country into recession. "We noted that we'd need to see a substantial upside surprise to get a rally in China-related risk assets, and this certainly constitutes such a surprise," Scotiabank said in a client note.
China, the world's second-largest economy, is the top export markets for many Asian countries. The ringgit rose as much as 0.3 percent to 3.2040 per dollar, its strongest since December 11, as interbank speculators chased it after the upbeat China flash PMI. Some short-term investors took profits, limiting the ringgit's gains, as they see a resistance level at 3.2000, traders said.
Malaysia's consumer prices in April rose 3.4 percent in April, slightly lower than expectations and the previous month, data showed on late Wednesday. A foreign bank trader in Singapore said he would sell the ringgit's one-month NDFs around 3.2070 per dollar, while looking for buy around 3.2150. The NDFs rose 0.1 percent to 3.2112 after strengthening to a six-month high of 3.2055.
The won gained on exporters' demand for month-end settlements and as foreign investors extended their buying spree in Seoul's main stock exchange to an eighth consecutive session. Foreigner have bought a combined net 2.26 trillion won ($2.20 billion) during the period, according to the Korea Exchange. The South Korean currency extended gains after the China flash PMI, even though caution rose over possible intervention by the foreign exchange authorities. "I wonder how the authorities could handle rising exporters' demand before the month-end," said a foreign bank trader in Singapore.
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