The South Korean won and the Philippine peso led emerging Asian currencies higher on Wednesday as risk sentiment improved after strong China trade data and a record Wall Street finish. The Bank of Japan's bold easing programme also helped drive up the Indonesian rupiah and the Malaysian ringgit on views that investors will borrow a cheaper yen and seek higher yields in Southeast Asia, traders said.
China's imports jumped 14.1 percent in March from a year earlier, far exceeding expectations, indicating that domestic demand in the world's second-largest economy was gathering steam for a recovery. "With risk appetite levels looking placid, markets may also attempt to utilize any further indications of a global recovery to channel into risk sensitive assets, especially if the FOMC minutes tonight do not point to any urgency to tilt towards an exit strategy," OCBC Bank said in a note.
The peso rose as interbank speculators covered short positions, although data showing declining exports capped the currency's upside, traders said. Philippine exports fell for the second consecutive month in February, posting the steepest drop in 14 months, casting doubt on the government's first quarter growth forecast. "It is more of temporary long dollar fix adjustment," said a Philippine bank trader in Manila, referring to cutting bullish dollar positions. The rupiah gained on bond inflows, although dollar demand from corporates limited its gains, traders said.
Investors are keeping an eye on whether BI tightens policy by hiking the overnight deposit facility rate, called FASBI, to help ease the country's current account deficit. The won gained on demand from exporters' for settlements and as local investors covered more short positions. But its upside was capped by the geopolitical tension in the peninsula and expectations of dollar demand linked to companies' dividend payments to foreign shareholders.
"The won is expected fall, probably to 1,145 per dollar, if the North launches a missile, but it will quickly rebound. Dollar long positions look still heavy," said a senior foreign bank trader in Seoul. The dollar/won's 14-day RSI stood at 70.4, still above the 70-threshold.
The ringgit earlier hit 3.0180 to the US dollar, its strongest since January 21, according to Thomson Reuters data, on bond inflows and demand against the Singapore dollar. The five-year government bond yield fell to 3.168 percent and the 10-year bond yield slid to 3.399 percent. Both were their lowest since late July last year. But the Malaysian currency gave up most of earlier gains as investors took profits after the country set May 5 as a date for a general election. Traders and analysts said the ringgit has priced a narrow victory for the National Front led by Prime Minister Najib Razak in. Opinion polls also suggest such a result.