Asian currencies were broadly firm on Monday as the Japanese yen rebounded from last week's lows, the Chinese yuan hit a fresh post-revaluation high and regional equity markets posted strong gains.
Friday's data showing the US economy created 128,000 jobs in August, just above expectations, did little to alter the view that US interest rates would be on hold for the rest of the year, adding momentum to the Asia currency rally. "The US numbers were not particularly good and there continues to be a scaling back of rate-hike expectations," said BNP Paribas currency strategist Thio Chin Loo.
The yen rose about three quarters of a percent from levels traded late on Friday, lifted by news on Monday that Japanese firms increased capital spending by 16.6 percent in the second quarter compared with a year earlier.
The Singapore dollar broke through a key chart level to hit its highest in about 3-1/2 months at 1.5665 per US dollar, while the Philippine peso extended last week's gains to rise to a four-year high at 50.48 to the dollar.
The South Korean won and Taiwan dollar added roughly a third of a percent each. The Thai baht rose about 0.5 percent to a 2-1/2-week high at about 37.33 per dollar, while the Malaysian ringgit broke out of recent ranges to firm to 3.6550 per dollar, its highest in almost a month.
The yuan strengthened as far as 7.9400 per dollar, its highest since it was revalued in July 2005. It was expected to remain in focus ahead of this month's meeting of finance ministers of the Group of Seven (G7) industrialised nations, with China facing pressure to step up the pace of currency appreciation.
"Currencies like the Singapore dollar and Malaysian ringgit are doing well because there is a risk of concerted pressure on the Chinese currency," said Richard Yetsenga, a currency strategist at HSBC in Hong Kong. "They are the ones to benefit."
Some traders said they suspected the Monetary Authority of Singapore (MAS) had intervened in the market to cap gains in the Singapore dollar, which they felt was probably trading at the strong end of its secret trade-weighted band.
Others said it was less clear. "I'm not too sure about intervention - but one of the local banks has been selling Sing dollars and that is surprising," said a trader. "With 2-3 weeks left to the next MAS policy review, everyone is trying to second guess what they will do." The latest Reuters poll on market positioning in Asian currencies suggests investors have stepped up long Singapore dollar positions versus the US dollar.
Taking a long position on a currency is essentially a bet that it will strengthen. Elsewhere, the ringgit continued to benefit from positive sentiment following Friday's 2007 Malaysian budget.
The budget unveiled the first cut in corporate tax since 1998 and dealers said this, together with a comment in the economic report also released on Friday that a stronger ringgit would help contain inflation, boosted the currency. "About 80 percent of the move in the ringgit is related to the budget reaction," said a Kuala Lumpur-based trader.
"There were comments from finance ministry officials about the ringgit being used to fight inflation and this saw an immediate 100-point reaction which is continuing today." Malaysia's benchmark stock index rose to its highest level in almost four months, bolstering the ringgit.
Other Asian equity markets were also firmer and in Taiwan foreign funds bought a net 10.71 billion Taiwan dollars of shares compared with about 6.8 billion on Friday.