SINGAPORE: Most emerging Asian currencies rose on Thursday as slowing inflation and output in China spurred hopes of more policy stimulus, and the South Korean won edged up after the central bank held rates steady and on foreigners' massive stock demand.
The Taiwan dollar enjoyed financial inflows, while the Malaysian ringgit strengthened past a psychological resistance at 3.1000 per dollar.
China's annual consumer inflation fell to a 30-month low of 1.8 percent in July from June's 2.2 percent, while the producer price index dropped 2.9 percent in July from a year earlier, both powering Asian stocks to a three-month high.
Annual growth in factory production of the world's second-largest economy slowed to the weakest in just over three years and below market expectations with retail sales and fixed-asset investment expansion weaker than forecasts.
"The data fanned hopes for some monetary easing from China and supported sentiment. I see mild support to Asian FX," said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong, expecting Beijing to cut banks' reserve requirement ratios.
Still, Cheung said emerging Asian currencies may not see a strong boost from such expectations as the central banks of South Korea and Japan did not take stimulus steps at a time when a slowing global economy was hurting regional markets.
Earlier, Bank of Korea held fire but investors continued to price in another reduction soon to shore up Asian's fourth-largest economy.
The Bank of Japan also kept monetary policy steady but cut its assessment on exports and output as companies feel the pinch from slowing global growth, signalling its readiness to expand stimulus again if risks to the outlook grow.
The won gained as some investors cleared short positions they had built on expectations of a rate cut after the central bank kept interest rates steady.
The decision was expected, but some had hoped Bank of Korea would lower borrowing costs to support growth.
The South Korean currency found more support from exporters' demand and as foreign investors extended a buying spree to a fourth consecutive session in Seoul's main stock market with a net purchase of 1.57 trillion Korean won ($1.39 billion), their largest daily buying since July last year.
They have scooped up 2.53 trillion won worth of stocks during the four sessions, Korea Exchange data showed.
Investors are also keeping an eye on possible won bids linked to foreigners' acquisition of a stake in South Korea's Kyobo Life Insurance.
A group of investors that includes private equity fund Affinity Equity is buying a $1.1 billion stake in the unlisted Kyobo from Daewoo International Corp.
Still, traders hesitated to add bullish bets on the won around mid-1,120 per dollar amid caution over possible intervention by the foreign exchange authorities to stem the local unit's rallies, dealers said.
"They may not be happy with a strong won, especially after BOK did not cut interest rates," said a senior foreign bank dealer in Seoul.
The Taiwan dollar gained on foreign financial inflows and demand from local exporters, dealers said.
The island's importers bought US dollars for payments, limiting the local unit's upside, they said.
The ringgit earlier appreciated 0.4 percent to 3.0920 versus the greenback, clearing resistance at 3.1000.
But the Malaysian currency gave up some of the gains with another resistance at 3.0900, its weakest on March 23, and after data showed the country's industrial production growth missed market expectations.