Most Asian currencies rose on Tuesday as investor sentiment improves steadily after a recent sell-off, shrugging off the impact of a weak yen ahead of a Bank of Japan policy meeting later this week.
The Indonesian rupiah was boosted by a 18-percent jump in shares of Indonesian gas distributor PT Perusahaan Gas Negara (PGN) after government and stock exchange officials met company executives to clear the air over a delay in a project.
The rupiah was quoted almost 0.4 percent higher at 9,078 per dollar. The South Korean won was quoted as high as 935.4 per US dollar, boosted by demand for the local currency from foreign investors who have bought domestic shares.
However, a Reuters poll indicated that the market has switched to a short position in the Korean won from a long one late in November. The South Korean government said on Monday it planned to give tax breaks to domestic firms investing abroad to help promote capital outflows to help cap the won's strength.
Asian currencies bounced back on Monday after coming under pressure since earlier this month due to an unwinding of the yen carry trades, Thailand's revised foreign investment laws and the decline in emerging market stocks and commodity prices.
"The dollar/yen is doing its own thing, focusing on the Bank of Japan, while Asian currencies are for the time being focused on the dollar moves against other major currencies," said Callum Henderson, currency strategist at Standard Chartered Bank.
"Market sentiment has stabilised," he added. The yen hovered near a 13-month trough against the dollar on Tuesday, attracting little buying support despite expectations the Bank of Japan will announce on Thursday a rise in interest rates to 0.5 percent from 0.25 percent.
The Bank of Thailand on Wednesday is expected to set its new policy rate - the 1-day repo - although analysts polled by Reuters were split on whether the rate would be set at 4.75 percent or 5 percent. The 14-day repo, the central bank's previous policy rate, stands at 5 percent.
The Thai baht, under pressure since capital controls were imposed in mid-December, fell a quarter of a percent before steadying near 36 per dollar. The Malaysian ringgit edged up to a nine-year high on the stronger side of 3.5 per dollar, while the Philippines peso rose to 48.725 per dollar.
The yuan rose for a third straight session, hitting a post-revaluation high of 7.7876 per dollar as the commerce ministry think-tank said that the yuan was undervalued and further appreciation was needed to balance the economy.
But the Chinese Academy of International Trade and Economic Cooperation cautioned that China should avoid repeating Japan's serious asset price bubbles after yielding to US pressure to let the yen rise sharply in the 1980s. The yuan has now appreciated 4.1 percent since it was revalued to 8.11 per dollar on July 21, 2005.