The South Korean won led most Asian currencies higher on Friday as investors snapped up regional stocks on upbeat US corporate results and an improvement in European factory and services data. Traders have been betting most of the 91 European banks being examined will pass the tests and analysts believe Asian currencies will be supported, baring no nasty surprises.
"If any, probably mildly positive since the results are likely to show overwhelmingly 'pass' marks and sceptics are not likely to be listened to right now," Westpac strategist Sean Callow said, when asked how emerging Asian currencies will react to the tests.
The won jumped as much as 0.9 percent to 1,192.9 per dollar, the highest in 10 days. But it later pulled back to 1,197 as local importers bought dollars for settlements, and caution grew over possible dollar-buying intervention by the authorities.
Investors were also reluctant to chase the won higher ahead of the results of European banks' stress tests late in the day. "It is hard to push up the won more, given the authorities. As the won gained, many importers placed dollar bids," said a foreign bank dealer. The peso gained a third of a percent to 46.37 per dollar. Dollar/peso NDFs dropped across the curve, with one-month NDFs falling to 46.50 from 46.60 late on Thursday. Meanwhile, one-month onshore dollar/peso forwards dip to 46.516 from 46.684 on Thursday.
The onshore/NDF spread narrowed to 16 points from 84 points, reducing the allure of arbitrage. The Thai baht gained a tad to 32.25 per dollar, tracking broad rallies in Asian currencies and equities. The baht has appreciated nearly 3.4 percent against the dollar this year despite the political turmoil earlier this year, trailing the Malaysian ringgit and Indonesian rupiah.