SINGAPORE: Most emerging Asian currencies rose on Monday as tepid economic indicators were expected to prompt stimulus by major central banks, though the gains were limited by sustained worries about a global slowdown.
The Taiwan dollar hit its strongest in more than three months as traders said the central bank temporarily has scaled back its moves in the currency market.
The South Korean won touched a one-month peak and the Malaysian ringgit reached its firmest in more than two weeks.
Asian stocks made small gains with expectations rising that soft US jobs data would cause the Federal Reserve to announce fresh easing this week. European policymakers are also seen making progress to tackle the euro zone's debt crisis, improving risk sentiment.
Weak Chinese trade figures underlined the likelihood of more Beijing-backed spending to deal with damage to the domestic economy by firms cutting production, inventories and imports in the face of anemic global demand.
South Korea unveiled a $5.2 billion stimulus package including tax breaks worth $2 billion.
"The big picture now is that economic conditions for emerging markets, and Asia in particular, are continuing to deteriorate, but the outlook for market is improving as investors are taking the weakness as an indication of more decisive policy support," said Dariusz Kowalczyk, senior economist and strategist for Credit Agricole CIB in Hong Kong.
Kowalczyk said emerging Asian currencies are also expected to strengthen further.
Last week, most regional units rose, cheered by the European Central Bank's new bond-buying programme.
Despite steps by major central banks and governments to spur global growth and ease European debt crisis, the slowing of regional economies will keep investors from adding more positions in Asian currencies, dealers and analysts said.
Foreign exchange authorities are unlikely to let their currencies continue to appreciate as they will try to protect their export-driven economies, they added.
Adrian Foster, Rabobank International's head of Asia-Pacific financial markets research said emerging Asian economies have been outperforming despite a slowing global economy. Still, the outperformance should not be overstated, he added.
Foster said investors may buy the euro against emerging Asian currencies in the longer term, although he would be cautious over such trading in three to four months, given the euro zone's debt problems.
Selling the euro versus regional units has been popular trade as investors were looking for assets in better economic and fiscal fundamentals.
"For a longer time frame of six to nine months, it does make sense to think of the euro moving higher against Asian currencies because European policymakers slowly and steadily put some policies in place," Foster said.
TAIWAN DOLLAR
The Taiwan dollar firmed to 29.670 per US dollar, its strongest since May 31 on demand from foreign banks.
The central bank was barely spotted in the currency market, which prompted views that the authorities may allow more appreciation in the local currency, at least until the Fed's policy meeting on Wednesday and Thursday.
But traders were wary of possible intervention by the central bank to slow down the Taiwan dollar's strength, while domestic importers bought greenbacks on dips for payments.
RINGGIT
The ringgit advanced to 3.0960 per dollar, its strongest since Aug. 24, but the local unit gave up some of the gains on profit-taking.
Traders hesitated to buy the Malaysian currency on growing worries about an economic slowdown.
Malaysian industrial output grew 1.4 percent in July from a year earlier, missing market expectations, official data official showed.
Amid the sluggish economy, investors were also cautious over possible intervention by the central bank to check the ringgit's strength.
"The ringgit is impacted by domestic concerns with exports getting lower," said a Kuala Lumpur-based dealer.
PHILIPPINE PESO
The Philippine peso gained, but interbank speculators booked profits with the central bank spotted buying dollars to stem further gains for the best performing emerging Asian currency this year.
Local corporates also started showing interest in buying dollars, dealers said.
"With two risk events this week, the ESM decision and the Fed meeting, I think the market would be more vulnerable for profit-taking," said a foreign bank dealer in Manila, referring to Wednesday's ruling by Germany's constitutional court on a motion to block establishment of the European Stability Mechanism as the euro zone's new, permanent rescue vehicle.
WON
The won hit 1,127.5 per dollar, its strongest since Aug. 10 and a notch weaker than the 76.4 percent Fibonacci retracement at 1,127.3 of its depreciation last month.
Still, traders looked to sell the local unit on rallies amid importers' dollar demand and as caution grew over possible intervention by the foreign exchange authorities to slow down the currency's strength.
Investors are also keeping an eye on the central bank's rate meeting on Thursday.
"Even if the won advances more, it will face a roadblock around 1,125. The authorities may step in around the mid-1,120 levels," said a senior foreign bank dealer in Seoul.
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