Most emerging Asian currencies edged up on Tuesday as China's economic growth data held no nasty surprises, but gains were capped by lingering worries that Beijing will allow the yuan to weaken further to support the world's second-largest economy. The Hong Kong dollar, however, hit four-year lows as it fell sharply for a fourth straight session as volatility in the Chinese yuan spilled over to the currency in the former British colony.
China's economic growth eased to 6.8 percent in the fourth quarter from a year earlier, as predicted by many economists, while December factory output, retail sales and investment growth were all slightly weaker than expected, pointing to a further loss of momentum. However, there were no signs of a hard landing that some investors have feared. That caused investors to unwind some of bearish bets in emerging Asian currencies such as Malaysia's ringgit.
"Slowdown concerns remain and that will keep Asia FX still under pressure," said Saktiandi Supaat, head of FX research for Maybank in Singapore. Emerging Asian currencies have been under pressure from worries about a slowing China's economy as it is the largest overseas market to many of regional peers. Spot ringgit rose in thin trading as oil prices stabilised after strong Chinese fuel consumption data. The currency's non-deliverable forwards (NDFs) also strengthened on demand from long-term investors.
The Malaysian currency closely tracks crude prices as the country is a major supplier of palm oil and natural liquefied gas. Sentiment towards the ringgit stayed bearish as crude oil prices are unlikely to rebound with the full return of Iran to oil markets seen deteriorating a supply glut. The rupiah gained on some bond inflows to seek higher yields. The Indonesian currency also advanced in NDFs markets. The official Jakarta Interbank Spot Dollar Rate, which the central bank introduced in 2013 to manage exchange rate fluctuations, was fixed at 13,921, slightly firmer than the previous 13,931.