Most emerging Asian currencies rose on Wednesday as tame US inflation data caused investors to trim bets on a Federal Reserve interest hike in December and as Chinese growth data soothed some concerns about the world's second-largest economy. The Chinese yuan firmed after data showed the economy grew 6.7 percent in the third quarter from a year earlier, as expected, though September indicators were mixed.
The resilient GDP reading offset pressure from corporate dollar demand, but expectations of further slippage in the renminbi persist, traders said. South Korea's won and Taiwan's dollar hit their strongest levels in more than one week on equity inflows. The Thai baht gained as traders unwound bearish bets on views that political uncertainties after the death of King Bhumibol Adulyadej may ease. The dollar retreated from a seven-month high in the wake of US inflation data. The so-called core CPI, which strips out food and energy costs, gained 0.1 percent last month after climbing 0.3 percent in August. That slowed the year-on-year increase in the core CPI to 2.2 percent following a 2.3 percent rise in August.
"Asian currencies found some support as markets used the inflation data as excuse to take profits from the dollar's recent rallies and cut some bets on a December Fed hike," said Jung Sung-yoon, a foreign exchange analyst at Hyundai Futures in Seoul. "I doubt how further they can strengthen from here, given various external uncertainties such as the ECB policy. Worries about China's economy also remain," Jung added. China's industrial output growth in September unexpectedly cooled to 6.1 percent from a year earlier, defying expectations for a slight pick up to 6.4 percent, while a sharp drop in property construction starts fanned fears of a correction in the high-flying property market. The won advanced 0.9 percent to 1,119.8 per dollar, its strongest since October 11.
Foreign investors were set to extend their buying spree in Seoul's main stock market to a fifth straight session. The South Korean currency found further support as offshore funds dumped dollar holdings to limit losses, traders said. In the third quarter, offshore funds sold $4.3 billion to buy won in non-deliverable forwards market, central bank's preliminary data showed. That was first quarterly selling since October-December last year.
The Taiwan dollar rose 0.8 percent to 31.424 per the US dollar, its strongest since October 7. Local stocks advanced 0.7 percent on demand from foreign investors. Exporters bought the Taiwan dollar for settlements around 31.500 although those corporate bids were not that strong, currency traders said. The central bank has not been spotted intervening to stem the currency's gains yet, traders said.
The baht rose after Thailand's junta sought on Tuesday to reassure the country that the death of King Bhumibol last week would not upend plans for a return to democratic rule, which include a general election in late 2017. But the Thai currency gave up some of earlier gains on continuous equity outflows. Foreign investors also cut local bond holdings by late morning on Wednesday, the Thai Bond Market Association data showed.
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