Most emerging Asian currencies rose on Tuesday as the yen rebounded and Australia's central bank left its policy interest rate unchanged, defying some expectations of a cut. The Taiwan dollar gained on stock inflows, while the South Korean won advanced on corporate demand. Malaysia's ringgit rose on short-covering.
The Japanese yen strengthened past 120 per dollar level after Etsuro Honda, an economic adviser to Japanese Prime Minister Shinzo Abe, told the Wall Street Journal in an interview that dollar/yen may be at the "upper limit of comfort zone." Earlier, the Reserve Bank of Australia (RBA) kept its cash rate steady at a record low of 2.25 percent, surprising some who had looked for another reduction after February's easing.
The Australian dollar jumped after the decision, providing support to emerging Asian currencies. "The RBA decision prompted only short-covering in Asia FX," said Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul. Australia's central bank left the door open for further easing at future policy meetings.
China's central bank cut interest rates on Saturday, fanning expectations of regional easing to tackle slowing growth and deflationary pressure. Regional currencies lost ground on Monday. "It is difficult to add more bullish bets on Asia as regional monetary policies are seen easier after China," Park said. By contrast, US yields remained high, indicating expectations of the Federal Reserve's interest rate hikes stay intact. The won gained on demand from exporters for settlements.
The South Korean currency extended gains after the Australia's central bank left rates unchanged. Caution increased over possible intervention by the foreign exchange authorities to stem the won's appreciation. The authorities were on Monday suspected of intervening to defend 1,100 per dollar level, traders said. Against the yen, the won strengthened to 9.1557, its strongest since February 11. The Taiwan dollar advanced from Monday's close of 31.568. Traders said the central bank had weakened the Taiwan dollar with intervention as the market closed on Monday. Still, the upside in the Taiwan dollar was limited as the US dollar stayed firm on higher yields.