Asian currencies bounced back on Monday as regional stocks rallied after the US Federal Reserve cut its discount rate in a surprise move on Friday, but the spectre of a credit market squeeze still weighed on sentiment. The Korean won steadied near 943 per dollar after hitting 939.9, which was up about 1 percent from late Asian trade on Friday.
The high-yielding Indonesian rupiah rose as far as 9,380 per dollar, up nearly 1 percent, although it remains the worst performer in Asia this year with a loss of 4.2 percent versus the dollar.
A Jakarta-based trader doubted that the rupiah would sustain its rally in the near term, given continuuing jitters about the US subprime market crisis. "The subprime issue is still not finished - there is still sdoubt about it. If the subprime woes turn up again, I'm afraid the rupiah will go down again," he said. But Indonesia's central bank would want to stop the rupiah falling below the 9,500 level, traders said.
Last week, central banks in Indonesia, Malaysia and the Philippines were reported to have intervened to support their currencies as investors fled risk amid credit market turmoil.
MSCI's measure of Asia Pacific stocks excluding Japan jumped 5.5 percent following a rebound in US stocks on Friday after the Fed cut its discount rate. Leading the pack, Indonesian stocks jumped 6.6 percent, while South Korean shares surged 5.7 percent.
Rising local stocks helped drive the Singapore dollar as far as 1.5240 per US dollar, up almost 0.9 percent from late Asian trade on Friday and its strongest in nearly a week.
Elsewhere, the Thai baht rose as high as 34.30 per dollar, up more than 0.8 percent, while the Malaysian ringgit gained about 0.6 percent to 3.491 to the dollar. Philippine markets were closed for a public holiday.
Many analysts remained cautious as fears of a global credit squeeze persisted, even though the Fed's statement accompanying its discount rate cut fuelled expectations that it could be moving towards lowering its benchmark fed funds rate target.
Thomas Harr, a currency strategist at Standard Chartered Bank, said he would refrain from telling his clients to buy into Asian currencies for now, despite the recovery in Asian stocks.
"I think what we are seeing today is obviously a little bit of recovery, which is natural given that the Fed at least did something by cutting the discount rate on Friday," he said. "But the feeling in the market is that this may not improve liquidity that much. It's not clear that we are out of the woods yet and we expect the market to be choppy in the coming days."
The Taiwan dollar rose on Monday, lifted by US dollar sales by exporters and on the non-deliverable forwards market and by a sharp rebound in domestic stocks after the US Federal Reserve cut its discount rate. But outflows by oil importers capped the Taiwan dollar's rise. The local currency ended firmer at T$32.890 to the US dollar from the previous close of T$32.931.