Most emerging Asian currencies extended gains on Tuesday as investors continued to seek out higher yields in the region amid expectations of further monetary policy easing around the globe. South Korea's won hovered near a 15-month high on capital inflows and catch-up demand after a holiday on Monday when its regional peers rose. Taiwan's dollar gained on demand from exporters.
The Malaysian ringgit climbed as an overnight rally in crude prices eased concerns over the country's oil and gas revenues. Asian equities rose to one-year highs as investors predicted an extended phase of easy monetary policy around the globe. Investors were awaiting a slew of US economic data due later on Tuesday such as consumer prices to gauge prospects of the Federal Reserve raising interest rates in the near term.
Upside surprises in those indicators could renew expectations of further US monetary tightening although few see the Fed raising borrowing costs soon, especially given the recent downbeat economic data. Other major central banks are expected to deliver more stimulus. "Even though the odds could rise, the Fed is less likely to take action before December," said Qi Gao, an emerging Asian currency strategist for Scotiabank in Singapore.
"So, global excessive liquidity will continue to chase yield," Gao said, adding emerging Asian currencies, especially the won, the ringgit and Taiwan dollar, will strengthen further. The won gained 0.9 percent to trade at 1,093.7 per dollar as foreign investors were net buyers in both of South Korea's stocks and bonds markets. That compared with a near 15-month peak of 1,091.8 hit last week.
There was heightened caution over possible intervention by the local foreign exchange authorities to curb further strength in the second-best performing emerging Asian currency so far this year. The authorities have hardly been spotted so far on Tuesday, but importers bought dollars for payments, limiting the won's upside, traders said. Last week, the authorities were suspected of "actively" intervening to defend a psychologically important 1,100 level, traders said.
The Taiwan dollar rose as exporters bought it for settlements. Foreign investors were net buyers in the island's main stock market in the previous eight straight sessions, although foreign financial institutions were not actively purchasing the currency. The central bank has not been spotted in the market to stem the Taiwan dollar's strength even as investors remain wary of potential intervention, traders said. The ringgit gained as most of Malaysia's government bond prices advanced.
The Malaysian currency pared some of its earlier gains as oil prices in Asia eased on profit-taking. Currency traders were reluctant to chase the ringgit on rallies, noting chart resistance around 3.9900 per dollar. "I will sell dollar/ringgit around 4.02. There is not much inspiration to add positions in either way here," said a senior Malaysian bank trader in Kuala Lumpur.