Most emerging Asian currencies edged up on Tuesday as a broad weakness in the dollar supported commodities such as oil while gains in regional stocks also bolstered sentiment. The Chinese yuan, however, slid as corporate dollar demand offset a stronger central bank daily guidance rate. South Korea's won hit a four-and-a-half month high on demand from exporters for settlements. Taiwan's dollar slightly rose on some equity inflows. The Indonesian rupiah strengthened, tracking gains in most government bonds.
The US dollar stayed near an eight-month low against a basket of six major currencies. The greenback has been under pressure after Federal Reserve Chair Janet Yellen recently dampened expectations of US interest rate hikes anytime soon. "EM Asian currencies could continue to advance in the coming weeks on a dovish stance of the Fed, while staying cautious on prospects for resurfacing fears over the Fed's tightening when approaching June FOMC meeting," said Qi Gao, an emerging Asian currency strategist for Scotiabank, in a client note, referring to the Federal Open Market Committee.
The won rose as much as 0.4 percent to 1,141.8 per dollar, its strongest since November 26, 2015. The South Korean currency pared some of its earlier gains on corporate dollar demand, which traders said appeared linked to dividend payments by local companies to foreign shareholders.
Caution also grew over possible intervention by the foreign exchange authorities to stem the appreciation. Once the won strengthens past a chart resistance level around 1,142, the currency may head to 1,126.9, the 50 percent Fibonacci retracement of its depreciation from 2014 to 2016, analysts said. Meanwhile, traders hesitated to add aggressive positions ahead of a market holiday on Wednesday for parliament elections.
The Taiwan dollar advanced in thin trading after some foreign investors bought local shares. The island's currency pared some of its earlier gains as foreign financial institutions bought the US dollar after domestic equities saw outflows in the previous five consecutive sessions.
Traders stayed cautious over possible intervention by the central bank to curb the appreciation in the local currency with one suspecting of official bids for the greenback around 32.330. That came after data showing Taiwan's exports fell more than expected in March.
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