The South Korean won and the Malaysian ringgit led gains in emerging Asian currencies on Tuesday as investors slowly returned to riskier assets, shrugging off China's latest hike in bank reserve requirements. However, market players remained cautious over how much further regional units may rise, given sustained concerns over a slackening global economic recovery and Greece's sovereign debt crisis, analysts and dealers said.
China's central bank raised the reserve requirement ratio for its commercial lenders by another 50 basis points late in the afternoon, its sixth increase this year. Earlier, China data showed industrial production and retail sales in the world's No 2 economy in May posted solid growth, indicating the economy is slowing, but not too quickly, boosting emerging Asian currencies.
The won rose as investors cleared dollar-long positions after China's data and on exporters' demand for settlements. China is South Korea's top export market. Still, the South Korean currency failed to extend gains as foreign investors continued to sell local stocks and importers also bought dollars on dips. The ringgit started the day around the previous close, but it extended gains as China's data prompted investors to build up dollar-short positions.
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