Most Asian currencies gained versus the dollar on Friday, with the Chinese yuan hitting a post-revaluation high and the Philippine peso benefiting the most from investors' improved appetite for risk. The high-yielding peso strengthened to 46.39 per dollar, up 0.6 percent from Thursday's close.
A trader in Manila said the buying interest in the peso was underpinned by expectations of stronger remittance inflows. "I'm looking for 46.30 to 46.75 next week," he said. The Indonesian rupiah, another high-yielder, rose nearly a quarter of a percent to 9,040 per dollar, while the Malaysian ringgit gained a quarter of a percent to 3.4565 per dollar.
However, investors have scaled back long positions on Asian currencies amid jitters over rising US bond yields, with sharp cuts seen in the Indonesian rupiah, Malaysian ringgit and Indian rupee, according to the latest Reuters poll. The survey showed markets still expecting the rupiah and rupee to gain versus the dollar but turning broadly neutral on the ringgit, South Korean won and Thai baht and slightly bearish on the Singapore dollar.
Even so, most analysts remain optimistic about the underlying strength of Asian currencies, although they caution that the volatility facing high-yielders could persist for some time.
"Overall, we should see most Asia currencies gain. The rising yuan over the past few days perhaps encourages some more positioning for long Asian (currencies), but I think it's still tentative," said Sean Callow, a currency strategist at Westpac.
The yen hit a 4-1/2-year low versus the dollar after Bank of Japan Governor Toshihiko Fukui said he wanted to be more sure that capital spending and consumption would hold up before tightening monetary policy. But the Chinese yuan hit a fresh post-revaluation high of 7.6233 per dollar, rising nearly a quarter of a percent.
Most analysts expect its appreciation to quicken as Chinese leaders try to rebalance the fast-growing economy and in response to heightened pressure from the United States. The South Korean won hit a one-week high at 927.90 to the dollar as demand from exporters and higher local stock markets prompted investors to dump dollars.
Traders are watching for Friday's US consumer prices and industrial production figures to gauge the health of the world's largest economy, which could set the tone for the dollar's direction and interest rate expectations. "There is no serious speculation of a rate hike at this stage, but clearly if the CPI comes out on the strong side, it will be unsettling for the market and supportive for the dollar," Callow said.