Most Asian currencies were set to end the year on a firm note, with the Taiwan dollar leading gains on Tuesday, as investors cheered fresh developments on the Sino-US trade deal front and upbeat factory activity data from China. The White House's trade adviser said on Monday the Phase 1 deal would likely be signed next week, but said confirmation would come from President Donald Trump or the US Trade Representative.
The deal announced earlier this month has alleviated concerns about near-term escalation in tensions between the world's two top economies - a major sign of relief for currencies in Asia, most of which ended 2018 in the red. Adding to the upbeat sentiment, data showed factory activity in China expanded for a second straight month in December, as Beijing's stimulus measures buoyed domestic demand.
The Taiwan dollar strengthened 0.5% on Tuesday, hitting its best level in more than a year. The trade-reliant economy has bucked a regional trend of growth downgrades, helped by manufacturers moving production back home from China to avoid higher tariffs.
China's yuan extended gains to a near three-week high, supported by a firmer-than-expected midpoint fixing by the central bank. Volatility was high during the year, with the currency breaching the key 7 per dollar level for the first time in over a decade in August, as trade tensions intensified. The yuan was set for a second straight annual loss.
The Singapore dollar edged up 0.1%, while the Malaysian ringgit advanced 0.3%. Investor focus will now turn to the fourth-quarter growth figures for Singapore.
The Indian rupee ticked up 0.1% but was set for a second annual loss. Concerns over a slowdown in growth weighed on the rupee this year, with economists stressing on the need for more fiscal intervention. Financial markets in the Philippines, Thailand, Indonesia and South Korea were closed for holidays. The Philippine peso and the Indonesian rupiah were up 0.2% and 0.4% respectively, in light offshore trade.
The peso and the rupiah were poised to gain about 3.5% and 3.6% respectively this year, with analysts saying these currencies benefited from demand for higher yields in a low-interest rate environment. The South Korean won was the region's worst performer for the year, weakening 3.5%, while the Thai baht emerged as the top performer, driven by its large current account surplus.
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