Won leads gains in Asian trade

The South Korean won rose on Monday as Moody's upgraded South Korea's rating outlook, leading gains among emerging Asian currencies, but their advance was capped by profit-taking after strong factory data failed to completely ease concern over a slowing Chinese economy.
Investors added positions in emerging Asian currencies on the first business day of the second quarter after unexpectedly strong China factory data on Sunday addressed worries about a severe slowdown in the world's second-largest market. China's big factories were surprisingly busy in March as a stream of new orders lifted activity to an 11-month high, but credit-constrained smaller manufacturers struggled, suggesting that the economy was still losing steam. Market players were hesitant to chase emerging Asian currencies further, seeing the improvement as largely seasonal.
"(The data) is supporting sentiment but after today's reaction investors will be cautious again, waiting for Q1 growth numbers from China," said Frances Cheung, senior strategist for Credit Agricole CIB in Hong Kong. China is scheduled to release first-quarter growth data on April 13. In March, emerging Asian currencies slid against the dollar on worries about a hard landing for China and a sluggish euro zone economy.
Dollar/won fell on stop-loss selling by offshore players and after Moody's raised its outlook on South Korea's sovereign credit rating to positive from stable, citing strong and improving fiscal positions and easing external vulnerability of the banking sector. Enrico Tanuwidjaja, a currency strategist at Maybank in Singapore, said the move was expected to add momentum to buying of the won versus the dollar and the yen. The won rose 0.6 percent against the yen.
But dollar/won failed to clear support at 1,126.8, the 50 percent Fibonacci retracement of its March rises, on dollar demand from importers. Offshore funds appeared to be maintaining long positions as they expect dollar bids linked to local corporate dividend payments to foreign shareholders, dealers said. "Unless exporters dump the dollar again, dollar/won may stay around current levels," said a senior foreign bank dealer in Seoul.
Interbank names and speculators sold US dollar/Singapore dollar after the strong China manufacturing data. Initially, the pair fell to as low as 1.2518, lower than the 61.8 percent retracement of its February-March gains. But market players including US banks covered short positions.
Dollar/rupiah rose as local investors bought the pair with dollar supply remaining scarce in domestic markets. But Indonesian bonds and stocks cheered a parliamentary decision to reject a government proposal to raise fuel prices, although lawmakers gave the authority to increase them on Saturday under certain conditions. The rupiah is seen supported by DBS Group Holdings Ltd's purchase of Bank Danamon Indonesia.