The Thai baht climbed to a 16-year high against the dollar on Tuesday and the Malaysian ringgit hit a three-month high, spurred by expectations that Japan's bold monetary easing will spur greater inflows into their bond and stock markets. The South Korean won, battered by rising tensions with North Korea, also regained some ground as offshore and onshore investors covered short positions, seeing its recent slide as excessive.
The baht breached 29 to the dollar and rose as much as 1.3 percent to 28.92, its strongest since 1997, according to Thomson Reuters data. Offshore investors including those from Japan and Europe bought the Thai currency, traders said.
The ringgit gained up to 0.7 percent to 3.0370, the strongest level since January 23, on continuous bond inflows.
"The market is waiting if Japanese are buying Asian bonds because yields in Japan are too low," said a Malaysian bank trader in Kuala Lumpur, adding Thailand, Malaysia and Philippines are expected to benefit mostly from the Bank of Japan's drastic easing.
The baht gained as Thai bond yields slipped. The five-year government bond yield fell to 3.09 percent from 3.10 percent of Friday. The 10-year bond yield skidded to 3.50 percent from 3.52 percent.
Bangkok financial markets were closed on Monday for a holiday.
The baht is emerging Asia's strongest currency this year on capital inflows, having gained about 5.7 percent against the dollar, according to Thomson Reuters data.
Analysts said it can appreciate more because of "carry trades" in which investors borrow cheap yen to put elsewhere to seek higher yields.
"Japan is relentless on QE and flush liquidity is looking to invest somewhere," said a senior Thai bank trader in Bangkok, referring to quantitative easing.
"The baht may stall a bit around here. However, in the medium-to-long term if the US, EU and Japan still keep their QE and Thai fundamentals have not changed, I still see the baht stronger," the trader said.
The dollar/baht's 14-day relative strength index (RSI) stood at 27.3, well below the 30-threshold. If the index is below that threshold, the pair is technically seen as oversold. The ringgit gained on bond inflows and demand from custodian banks for foreign stock buying, traders said.
Malaysia has seen higher inflows after Prime Minister Najib Razak called a long-waited general election earlier this month, reducing some political uncertainty.
Some investors bet that the country's ruling coalition will fare well in the election and it won't get a new government that would change policies and priorities.
The ringgit has gained 1.2 percent since April 3 when Najib dissolved the parliament.
The dollar/won's 14-day RSI was at 75.2, above the 70-thresold, indicating the won is technically oversold. Still, investors stayed wary as North Korea warned foreigners in South Korea to quit the country because they were at risk in the event of conflict.
The warning forced the won to give up most of earlier gains. "Investors are expected to reassess the won's (appreciation) trend as the tension is prolonged, differently from the past when we had just temporary events," said a foreign bank trader in Seoul.