Most emerging Asian currencies rose on Tuesday as regional stock markets advanced on hopes that the global economy may be slowly pulling out of a soft patch. South Korea's won gained as the central bank stopped short of signalling additional interest rate cuts after inflation in October accelerated to its highest in 11 months.
The Taiwan dollar hit a one-week high on stock inflows, while the Indonesian rupiah advanced more than 1 percent as local equities jumped. MSCI's broadest index of Asia-Pacific shares outside Japan broke a five-day losing streak, rising 1.3 percent, after a survey found global manufacturing growth accelerated to a seven-month high in October although the expansion remained muted. The Chinese yuan barely moved as state-own banks sold dollars to offset companies' strong demand, although that was on behalf of the central bank. That came as the People's Bank of China (PBOC) raised the midpoint fixing of the yuan by the most in a single day since the landmark revaluation in 2005.
China's central bank has often intervened to stabilise the yuan since its devaluation on August 11, especially ahead of the International Monetary Fund's executive board decision on whether to put the yuan on a par with the dollar, yen, euro and pound, known as the Special Drawing Rights (SDR) basket. The stabilisation efforts supported other Asian currencies as the devaluation has sparked expectations that China's neighbours may weaken their currencies to shore up exports.
Still, Asian currencies may be hit hard if Beijing loosens its grip on the yuan, analysts said. "The risk of PBOC relinquishing intervention after positive statement from the IMF remains acute in coming weeks," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore. "Into the year-end, USD/Asia either grind higher on a firmer USD or spike if PBOC changes track on the exchange rate policy."
The won gained after data showing South Korea's consumer price index rose 0.9 percent in October from a year earlier, the fastest rise since November last year, reflecting a further recovery in consumption. The Bank of Korea refrained from indicating further rate cuts as it keeps wary of household debt level and external risks, while it promised to maintain its monetary policy easy.
The Taiwan dollar rose 1.0 percent to 32.385 per the US dollar, its strongest since October 27, in thin trading on demand from some foreign financial institutions amid higher local stocks. The island's currency also found support from gains in the won, traders said. Still, traders stayed cautious ahead of a key US jobs data due on Friday. Exporters were on the sidelines as they did not see the level of around 32.400 as attractive.
The rupiah advanced nearly 1 percent as Indonesia's stocks rallied 1.6 percent, well outperforming Southeast Asian peers. The currency's non-deliverable forwards rose on demand from real money accounts and short-term funds. The official Jakarta Interbank Spot Dollar Rate, which the central bank introduced in 2013 to manage exchange rate fluctuations, was fixed at 13,594, stronger than the previous 13,682.
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