Most emerging Asian currencies rose on Thursday, adding to monthly and quarterly gains, as waning expectations of near-term US interest rate hikes spurred investors to seek higher yields in the region. The Chinese yuan climbed as the central bank set its daily guidance rate at its strongest this year. The renminbi was set to post its largest quarterly gain since July-September 2014.
Malaysia's ringgit hit a more than seven-month high to enjoy the best month in nearly 18 years, with government bond prices up. The South Korean won rose to a near four-month peak and produced its largest monthly gain in seven years, thanks to capital inflows.
Taiwan's dollar advanced to its strongest in more than seven months on demand from foreign financial institutions. The island's currency was on course for the best month in eight years, helped by increased inflows to buy Taiwan shares. The US dollar hovered around a five-month low against a basket of six major currencies as investors cut holdings in the greenback after Federal Reserve Chair Janet Yellen's comments on Tuesday. Yellen expressed caution about raising interest rates, highlighting external risks such as slower global growth.
Chicago Fed President Charles Evans on Wednesday underscored that stance, saying a "very shallow" series of interest rate hikes over the next few years is appropriate to buffer the US economy from outside shocks and the risk of inflation slipping too low. Emerging Asian currencies are likely to maintain support from receding expectations of Fed tightening in the near term, analysts and traders said.
"Asian currencies will continue strength on dovish FOMC, improving risk tone and relatively cheaper valuation," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore, referring to the Federal Open Market Committee. In March, the won and the ringgit led gains among regional peers. The won jumped 8.2 percent against the dollar this month, its largest monthly appreciation since March 2009, according to Thomson Reuters data. That helped the won achieve a quarterly gain of 2.5 percent.
Foreign investors added to South Korea bond holdings this month after heavily cutting them in February. They also increased their purchases of Seoul stocks. The ringgit has risen 7.1 percent so far this month, boosting its quarterly gain to more than 9 percent, on portfolio inflows and capital repatriation. That would be the largest monthly gain since September 1998 when Malaysia pegged the currency, Thomson Reuters data showed. The peg was ended in 2005. The currency's outlook stayed positive on the resilient economy and a recent rebound in oil prices, analysts said.
"We are seeing more evidence that asset managers - who are still mostly 'underweight' Malaysia bonds - may be starting to increase allocations to Malaysia," Nomura currency strategists said in a note. "The structure of foreign bond ownership appears to be shifting increasingly towards long-term investors such as central banks, sovereign wealth funds and pension funds."
The Singapore dollar has appreciated 4.2 percent against the US dollar so far this month, which would be the largest monthly gain since October 2011. Investors cut bearish bets ahead of the central bank's policy review in April. The Monetary Authority of Singapore may stay on hold next month while risks of easing has risen as global headwinds hurt the trade-dependent economy, a Reuters poll showed early March. Taiwan's dollar has gained 4.0 percent against the greenback so far in March, which would be the largest monthly appreciation since February 2008. Foreign investors bought a combined net T$154.5 billion ($4.8 billion) in the first 30 days of March, more than triple of February's purchase.
The Philippine peso has risen 3.3 percent so far this month, while the Indian rupee has climbed 3.2 percent.
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