Asian currencies rose on Thursday as stocks rallied from Tokyo to Mumbai, but the gains were capped by the dollars rebound against key currencies and lingering investor concerns about the global economy. The South Korean won jumped 2.5 percent to 1,329.7 per dollar, its highest since January 9, after a vice finance minister said the countrys liquidity situation had "very much" improved.
The wons sharp rebound - amounting to 15 percent this month - has caught many investors by surprise and forced those holding dollars to dump it to stop losses. Asian shares hit an 11-week high, following a rally on Wall Street buoyed by unexpectedly strong US housing and durable goods data that raised investors hopes that the worlds biggest economy may be over the worst. The MSCI index of Asia-Pacific stocks outside Japan was up 2.1 percent as.
The Thai baht gained a third of a percent to 35.35 per dollar and the Singapore dollar moved between 1.5079 and 1.5110 per US dollar, while the Malaysian ringgit was shackled in the range of 3.6190 and 3.6310 per dollar. "We expect dollar/ringgit to be rangebound within 3.62-3.64 range today," said a trader in Kuala Lumpur.
Many investors preferred to stay on the sidelines as they awaited further signs of improvement in the world economy, which still faces the possible scenario of a long and deep recession. "Risk appetite remains guarded, the market is still awaiting further developments," said Enrico Tanuwidjaja, a currency strategist at OCBC.
"The regional pairings are expected to trade rangebound today, with an exception of dollar/won probably still biased more heavy." Elsewhere, the Chinese yuan held steady near 6.8320 per dollar, while one-year offshore dollar/yuan NDFs dropped to 6.7580, implying a 1 percent appreciation from the spot.
Analysts expect Chinese policymakers to keep the yuan largely stable for now, despite volatility in the NDFs, which this week shifted from implying a weaker yuan. The dollar rebounded against the yen and the euro after hitting lows on Wednesday following US Treasury Secretary Timothy Geithners remarks that he was open to expanding the use of the International Monetary Funds synthetic currency, special drawing rights.
Investors initially interpreted the remarks as an endorsement of Chinas proposal to eventually replace the dollar as the worlds reserve currency with IMFs drawing rights, but Geithner later said the dollar would be the top reserve currency for a long time. Indonesias markets were closed for holiday.