India's rupee hit a one-month high on Wednesday after the central bank delivered another unexpected rate cut, while emerging Asian currencies barely moved ahead of US economic data and a European Central Bank meeting later this week. The Reserve Bank of India lowered its policy repo rate by 25 basis points to 7.5 percent, its second inter-meeting slash this year on the back of slowing inflation and a government commitment to fiscal discipline.
The rupee rose as much as 0.4 percent to 61.650 per dollar, its strongest since February 4. Indian stocks hit a record high, while the 10-year benchmark bond yield fell. That contrasted to recent weakness in other emerging Asian currencies such as the Chinese yuan and the Singapore dollar when central banks of those countries eased monetary policy.
"Rate cuts are positive for equities. India gets more inflows and that strengthens INR," said Sean Yokota, head of Asia strategy for Scandinavian bank SEB in Singapore. The rupee pared most of its earlier gains on caution over possible intervention by the central bank to restrain the best performing Asian currency so far this year.
The Indian currency has risen 1.9 percent against the dollar so far this year, Thomson Reuters data showed, as hopes of economic reforms by Prime Minister Narendra Modi attracted foreign money. Still, some analysts doubted further appreciation in the rupee.
"The RBI, in its monetary policy statement, highlighted that the INR 'has remained strong relative to peer countries', which, in our view, is clearly the key reason behind the inter-meeting surprise from a market impact perspective," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore. "The RBI appears to have adopted a weakening bias alongside a number of central banks. We expect USD/INR to trade higher from here." The Taiwan dollar gained after foreign investors continued to buy local stocks. Foreign investors were net buyers in the island's stock market during the first two days of March, purchasing a combined net T$4.8 billion ($153.1 million) worth of equities, Taiwan Stock Exchange data showed. Last month, foreigners absorbed T$96.6 billion worth of stocks in total, the data showed.
Credit Suisse saw more upside in Taiwan stocks on rising return on equity, falling interest rates and valuations. Traders across Asia hesitated to add aggressive positions in either way ahead of the US ISM services report and a reading on US private sector employment, before US jobs data due on Friday. Investors were also awaiting the ECB's policy meeting on Thursday and the implementation of its government bond buying programme, due to start this month.
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