Emerging Asian currencies rose on Thursday, as investors cut some bearish bets on regional units based on indications the Federal Reserve will only raise US interest rates gradually after the first hike in years. Fed officials on Wednesday continued to support December for a first hike, while many US central bankers backed up such tightening in their last policy last meeting. The views cemented expectations of a December lift-off, sending the US dollar to a seven-month high against a basket of six major currencies.
However, the greenback retreated on Thursday as prospects of the US first hike in nearly a decade were seen to be factored in. "As a December move has been priced in to some degree, the market shifted focus to the speed of additional rate increases. The Fed is expected to raise rates very gradually," said Jeong My-young, Samsung Futures research head in Seoul. Fed officials in their last meeting debated evidence the US economy's long-term potential may have permanently shifted lower, the minutes of the October gathering showed.
Jeong said Asian currencies "were seen excessively sold against the dollar, so they may rebound a bit more on position adjustments for a short term. But it is difficult to build up bullish bets." The Malaysian ringgit gained more than 1 percent as a temporary rebound in crude prices slightly eased concerns over the country's falling oil and gas revenue. South Korea's won advanced on exporters' demand, while Taiwan's dollar rose on stock inflows.
The Chinese yuan appreciated as the central bank set a stronger midpoint for only the second time this month. The ringgit gained 1.6 percent to 4.3220 per dollar, its strongest since November 9. Traders covered short positions in the worst-performing Asian currency so far this year. The Malaysian currency found further support from demand linked to daily fixing.
The won advanced nearly 1 percent to 1,160.9 per dollar, its strongest since November 13 as offshore funds unwound bearish bets and local exporters bought it for settlements. Foreign selling in South Korea's main stock market eased. "The current foreign exchange levels have almost fully priced in a Fed hike within this year," said a foreign bank currency trader in Seoul.
Another foreign bank trader said some offshore funds may take profits from the dollar's strength against the won if the Fed raises interest rates. The Taiwan dollar rose 1.1 percent to 32.650 versus the greenback, its highest since November 12, as foreign financial institutions bought the currency. Traders hesitated to chase the island's currency ahead of October export orders data due on Friday. It is expected to show continued weakness in demand for key technology goods. Taiwan's importers bought the US dollar for payments, limiting the island currency's upside. Exporters also did not buy the Taiwan dollar, as current levels were not considered attractive, traders said.