SINGAPORE: Most emerging Asian currencies rose on Wednesday, tracking stronger equities, while a weak Chinese yuan and expectations of an imminent US interest rate hike kept investors from adding bullish bets on regional units.
South Korea's won led regional currencies firmer on exporters' demand for settlements, while the Malaysian ringgit crawled up on higher oil prices and Toyota Motor Corp's near $450 million investment plan.
The yuan, however, hit a 3-1/2-month low, weighing on sentiment towards Asian peers, as China's central bank set its daily guidance rate at its weakest in five years.
"The PBOC is driving the path of depreciation with stability in mind," said Stephen Innes, a senior trader for FX broker OANDA Asia Pacific in Singapore, referring to the People's Bank of China.
"It could spark a currency war again either by policymakers or traders, then shorting ASEAN currencies as a proxy. I think Singapore is in a precarious spot given economic struggles."
Earlier, Singapore slashed its export forecasts for this year after the trade-reliant economy barely grew in the first quarter.
The US dollar also hovered near a two-month high against a basket of six major currencies on solid US housing data. US new home sales surged to a more than eight-year high in April with prices setting record highs.
That cemented prospects that the Federal Reserve may increase interest rates in June or July, which top Fed policymakers recently supported.
WON
The won advanced as some offshore funds cut bearish bets, seeing its depreciation as excessive.
The South Korean currency was the third-worst performing Asian currency so far this year with a 0.9 percent loss against the dollar, Thomson Reuters data showed.
Seoul shares jumped 1.3 percent, adding support for the currency.
Still, traders spotted continuous selling of the won from some foreign investors on rallies, given expectations that South Korea's central bank may cut interest rates later this year.
RINGGIT
The ringgit gained as traders unwound pessimistic positions as oil futures pushed closer to $50 a barrel with US crude hitting its highest in more than seven months.
The Malaysian currency hit a session high of 4.1000 per dollar after Toyota said it would invest about 49 billion yen ($445.8 million) to build a new car factory in the country to meet growing demand there.
Meanwhile, Malaysia's government bond prices slid, limiting the ringgit's upside.
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