Most emerging Asian currencies rose on Tuesday, enjoying capital inflows on sustained expectations that the US Federal Reserve will take its time before tapering its monetary stimulus and as China's reform plans bolstered risk appetite. The Indian rupee strengthened past 62.00 per dollar, the first time since November 6. The Indonesian rupiah advanced as foreign banks bought the currency ahead of the government's bond auction.
The South Korean won rose on demand from offshore funds, hitting its strongest against the dollar since October 24 when it touched this year's high. The Taiwan dollar advanced on foreign financial inflows. Investors were awaiting Fed Chairman Ben Bernanke's speech on "Communication and Monetary Policy" later in the day and minutes of the US central bank's October 29-30 meeting on Wednesday.
"The risks are that Asian FX rises more in the near term, but the US FOMC minutes will be important, as will US retail sales data," said Jonathan Cavenagh, senior FX strategist with Westpac in Singapore, referring to the Federal Open Market Committee. "These two events could push US yields higher, which will work against Asian FX. But until then risks are we see a grind higher across the board. I see risks that Southeast Asian currencies play further catch up to Northeast Asia."
The South Korean won edged higher in domestic trade on Tuesday, touching a near four-week high on the back of local stock gains and bets that the US Federal Reserve will not taper its stimulus in the near term The local currency was quoted at 1,056.0 against the dollar as of 0210 GMT, compared with Monday's domestic closing level of 1,057.9. It traded as high as 1,055.4, the strongest since October 24.
The extent of won strength was limited as investors are wary of potential dollar-buying intervention from local authorities to curb the won's gains. The currency is not far from the year-to-date high of 1,054.3 and is up around 0.7 percent against the dollar so far this week. "The market is biased towards dollar-won heading lower, but concerns about potential intervention is preventing investors from trading aggressively," a currency dealer said. "Given the current volume, I don't think the won will be setting a new 2013 high."