Most emerging Asian currencies pulled back on Thursday as traders took some money off the table as they wait on key US jobs data for clues on when the Federal Reserve might raise interest rates. The South Korean won ticked up slightly, outperforming regional peers, on demand from exporters for settlements. Asian equities rose on solid US economic data and overnight gains in crude prices. Oil prices on Wednesday rose about 2 percent with Brent crude hitting $52.09 a barrel, its highest since June 10.
Growing optimism on the world's top economy could encourage the Fed to raise interest rates in December, with some top US central bank officials already backing a tightening. Investors also grew wary of possible tapering of stimulus by the European Central Bank as such a move could reduce global liquidity, which has been supporting Asian currencies and bonds. Most regional government bond prices slumped further.
"With crude essentially back at the 50 handle and defusing somewhat global stagflation/deflation concerns, any hint of any taper... from a major central bank will be expected to catalyse a potential collision with the strong dollar narrative, resulting in heightened volatility ahead," said Emmanuel Ng, foreign exchange strategist at OCBC Bank, in a note. US employers are predicted to have added 175,000 jobs last month, according to the median forecast of economists polled by Reuters. The data is due on Friday and a solid figure could add to expectations of a Fed rate hike before year-end.
The country's service sector activity recovered sharply in September from six-year low hit in August, the Institute of Supply Management (ISM) survey showed on Wednesday. Chicago Federal Reserve Bank President Charles Evans said on Wednesday he would be "fine" with raising interest rates by year end if economic data continued to come in firm.
The won found more support as corporate demand prompted traders and some offshore funds to cut dollar holdings, although it was off session highs on caution ahead of the US jobs data. Seoul stocks were supported by market heavyweight Samsung Electronics hitting a record high. Samsung said on Thursday it will carefully review proposals made by US hedge fund Elliott Management for restructuring and a special dividend.