Most emerging Asian currencies jumped on Thursday with China's yuan hitting a two-month high, as the US Federal Reserve was seen in no rush to raise interest rates. The yuan jumped an unusually large 0.6 percent as traders said recent moves by China's central bank to support the currency was partially aimed at curbing speculators betting on its depreciation.
The Fed on Wednesday took a step closer to hiking rates, but downgraded its economic growth and inflation forecasts, indicating the US central bank may not rush to increase borrowing costs.
A majority of Wall Street's top banks now see the Fed holding off until September before raising interest rates for the first time since 2006, a Reuters poll showed.
That dragged down the dollar and US Treasury yields, while global stocks and commodities advanced. The greenback came under further pressure as the Fed highlighted its drag on US exports.
South Korea's won and Indonesia's rupiah surged more than 1 percent.
"The Fed mentioned slowing exports for the first time with concerns over growth. That indicated its worries about a strong dollar," said Jeong My-young, Samsung Futures' research head in Seoul.
"The dollar will take more time for correction after the recent overshooting," she added.
Still, the Fed's stance does not guarantee emerging Asian currencies will follow a long-term appreciation trend, investors and analysts said.
Despite Thursday's gains, many regional units have not fully recovered losses incurred after stronger-than-expected US February jobs data. The positive surprise in nonfarm payrolls had boosted expectations of an earlier rate hike, possibly in June.
"Some will argue that recent softness in select US economic data points, the strength of the USD, oil price volatility, and continued uncertainty with global economic growth prospects will combine to delay Fed policy normalisation, but we believe such analyses miss much of the point," said Rick Rieder, Chief Investment Officer of Fundamental Fixed Income at BlackRock, in a note.
Rieder said that while a short delay before US rates were increased was possible, a rate rise was on the cards.
He wrote: "...the precise date of lift off is less important than the fact that it will come soon."
Higher US borrowing costs usually hurt attractiveness of higher yields in emerging Asia.
The won started the session up 1.8 percent at 1,110.5 per dollar as offshore funds covered short positions in overnight non-deliverable forwards markets.
The South Korean currency pared a part of earlier gains with caution growing over possible intervention by the foreign exchange authorities to stem the currency's strength. Some traders suspected authorities would intervene to stop the won strengthening below the 1,110 level.
The country is closely watching movements in the financial markets, a foreign exchange authority official said earlier.
Local importers also used the stronger won as an opportunity to buy dollars needed for settlements.
The rupiah jumped 1.4 percent to briefly strengthen below 13,000 per dollar for the first time since March 9.
Still, the psychological resistance at 13,000 in the spot rate attracted dollar buying by local importers.
Offshore hedge funds sold the rupiah in non-deliverable forwards markets.
Indonesia's vice president on Wednesday told Reuters that the central bank should cut its benchmark interest rate by up to 100 basis points by the end of this year to support Southeast Asia's largest economy.
The ringgit advanced as Malaysia's stocks and bond prices rose.
The country's banking system exposure to the troubled government development fund 1MDB is a manageable risk, Fitch Ratings said.
The Malaysian currency cut some of earlier gains as hedge funds and interbank speculators sold it around its session high of 3.6510 per dollar.