The South Korean won and Thai baht strengthened on Monday as firmer-than-expected US economic growth figures supported risk sentiment, though market holidays and the US Federal Reserve meeting this week are keeping investors cautious. Data on Friday showed US economic growth accelerated in the first quarter, but the burst in growth was driven by a smaller trade deficit and the largest accumulation of unsold merchandise since 2015.
"The strong US GDP data failed to push the dollar higher but that is real positive news for riskier assets generally and for equities. The Asian markets are in a holding pattern, awaiting key data," said Khoon Goh, head of Asia research at ANZ. Goh also added that the start of long break in Japanese markets along with a shortened week of trading for all major regional markets has also contributed to subdued markets.
The South Korean won snapped seven straight sessions of declines and firmed as much as 0.3 percent to 1,157 per dollar. The won had weakened after data last week showed the economy contracted at a pace last seen during the global financial crisis, as companies slashed investments and exports slumped in response to Sino-US trade tensions and cooling Chinese demand.
ANZ's Goh said the South Korean currency was giving back some of the weakness it saw last week. This week, investors await key Chinese manufacturing surveys for April, which will be released on Tuesday with market participants waiting to see if the world's second largest economy sustained momentum after a surprise expansion in March.
According to a Reuters poll, China's factory activity likely expanded at a steady but modest clip in April, which would be the second straight month of improved business conditions, as government growth-boosting measures buoy the vast manufacturing sector. Asian markets would likely rally on any signs of growth in the China's manufacturing sector, given the economy's importance as a source of regional export demand.
Thailand, a largely export-driven economy, releases its March manufacturing data on Tuesday, while Asia's fourth largest economy South Korea publishes March industrial production and April preliminary trade numbers during the week. The global focus, however, will be on the Fed meeting, held Tuesday and Wednesday. Although no changes to policy settings are expected, investors will be watching for signs of dovish policy inclinations, given the upside surprise in first quarter US economic growth.
Another major gainer on the day was Thai baht, which strengthened 0.2 percent to 31.90 against the dollar, its strongest level in a week. The Malaysian ringgit, the Taiwan dollar and the Philippine peso appreciated slightly while the Chinese yuan was little changed. The Indonesian rupiah, however, traded marginally lower. Indian financial markets were closed on the day for a holiday.
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