The Thai baht and South Korean won led a mild consolidation in Asian currencies on Friday after recent sharp gains, but the Chinese yuan jumped when trade resumed after a week-long holiday. Spot yuan hit its highest against the dollar since a landmark revaluation in July 2005 and was expected to rise further as pressure for such a move mounted from the United States and European Union.
Investors took profits on Asian equities and gold while buying back US dollars, squaring positions before US employment data report and potentially contentious G7/IMF meetings that will focus on currencies. "While we may see more yuan appreciation in coming weeks, which is mostly priced in the market, there is an element of caution before the US jobs data," said an Asian bank trader.
ING expected spot dollar/yuan to drop to 6.50 per dollar in three months. The South Korean won recovered most of its early losses, supported by exporter demand for settlements and the rise in the yuan. Caution remained over further official intervention.
The won was quoted at 1,120.7 per dollar, down 0.55 percent from its previous domestic close of 1,114.5. It weakened earlier to 1,124.0 as investors covered short dollar positions. "A preference for short dollar positions increased on the yuan and as exporters were already lined up around 1,120," said a Seoul-based foreign bank dealer.
Foreign investors turned sellers on the local stock market, unloading a net 103.2 billion won of stocks. The Thai baht shed half a percent in lacklustre trade, tracking a broad Asian consolidation as markets wait for US payroll data late on Friday and ahead of a US market holiday on Monday.
Dollar/baht hit 30.11 after the comments against 29.85 late on Thursday. The baht has appreciated around 3 percent in the past month and 11 percent this year, making it the second-strongest Asian currency after the yen. The Malaysian ringgit dipped 0.60 percent to 3.1075 per dollar by early afternoon on interbank dollar covering.