Most emerging Asian currencies firmed on Tuesday, shrugging off a bounce in the dollar as investors remained doubtful the US Federal Reserve will raise interest rates soon. Malaysia's ringgit hit its strongest in more than seven months after oil prices rose overnight, while South Korea's won gained thanks to stock inflows. Regional units had slipped briefly in early trade after two Fed officials backed the case for a rate increase sooner rather than later.
Atlanta Fed President Dennis Lockhart said there was sufficient economic momentum to justify a further rate hike "possibly as early as the meeting scheduled for end of April". San Francisco Federal Reserve Bank President John Williams told Market News International that April or June would be "potential times for a rate hike." "They opened the door for an April hike but I wonder if that is really possible as things will not change in a month," said Yuna Park, currency and bond analyst at Dongbu Securities in Seoul.
"Today, there were just some corrections after overshooting. Emerging Asian currencies are likely to stay firm until we see more clear signs on a US tightening and Brexit," Park added, referring to fears that Britain may exit the European Union. Britons will vote in an in-out referendum in June. The ringgit gained as much as 1.2 percent to 4.0100 per dollar, its strongest since August 13.
Long-term foreign investors bought the Malaysian currency as rising crude prices eased concerns over the country's oil and gas revenues. The currency found further support from a report that China Railway Group plans to spend $2 billion to build a regional headquarters in Malaysia as a base for expansion into Southeast Asia. The won rose on demand from South Korea's exporters and equity inflows.
Foreign investors were set to become net buyers in the main local stock market for a ninth straight session. They have absorbed a combined net 2.2 trillion won ($1.9 billion) in shares during the period, the Korea Exchange data showed. Such demand caused offshore funds to scramble for the won to stop losses. "Offshore names kept dumping dollar holdings, which they had built up before. That broke supply and demand balance in the market," said a foreign bank trader in Seoul.
Caution grew over possible intervention by the foreign exchange authorities to stem the won's strength. The South Korean currency has risen 7.1 percent against the dollar so far this month, which would be the largest monthly gain since April 2009, according to Thomson Reuters data.
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