SINGAPORE: Eemerging Asian currencies strengthened past technical resistance lines on Thursday, spurred by hopes that the US Federal Reserve will soon take steps to bolster the economic recovery.
The Malaysian ringgit cleared a 200-day moving average, while the Singapore dollar breached the 61.8 percent Fibonacci retracement of its depreciation this month, shrugging off a survey pointing to weak Chinese factory activity.
The South Korean won rose on stop-loss buying amid foreign investors' sustained stock purchases.
The Fed is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably, minutes from its latest meeting suggested on Wednesday, boosting Asian shares and the euro.
"The FOMC minutes are taking precedent and leading to a pricing in of a higher probability for further policy accommodation in September," said Sacha Tihanyi, senior currency strategist for Scotiabank in Hong Kong.
"The QE dynamic has more to go, but it must see less solid data to support it," said Tihanyi, when asked if emerging Asian currencies could rise further, adding markets need to see data indicating a weak US economy.
Recent strong US economic indicators such as July retail sales and industrial output reduced hopes for the Fed's bond-buying programme or quantitative easing and put pressure on emerging Asian currencies.
Other major economies' outlook remained murky.
China's factories contracted in August the most in nine months with falling export orders and rising inventories, the HSBC Flash China manufacturing purchasing managers index (PMI) showed. That indicated that more policy action is probably needed to stop a slowdown in economic growth now in a seventh quarter.
"The reading increases the odds of more monetary measures," said Dariusz Kowalczyk, senior economist and strategist for Credit Agricole CIB in Hong Kong, referring to the required reserve ratio.
Kowalczyk said in a note that a cut in banks' reserve requirement ratio is highly likely while seeing a possibility of a rate cut slightly below 50 percent.
RINGGIT
The ringgit strengthened to as firm as 3.0970 per dollar, its strongest since Aug 9, clearing a 200-day moving average at 3.1095 and the 76.4 percent retracement at 3.1017, the 76.4 percent retracement of its August depreciation.
Domestic traders pulled out dollar bids around the moving average on growing risk appetite despite the weak HSBC Flash China PMI.
"The dollar story from last night is more overwhelming," said a Malaysian bank dealer in Kuala Lumpur.
Once the retracement is cleared, it may head to 3.0910, its strongest on Aug 8.
SINGAPORE DOLLAR
The Singapore dollar strengthened past 1.2457 to the greenback, the 61.8 percent retracement of its August depreciation on demand from macro funds and leveraged accounts.
The city-state's currency is technically seen trying to clear 1.2435, the 76.4 percent retracement.
But caution over possible intervention by the central bank to slow down its strength kept investors from chasing the local unit, dealers said.
The Singapore dollar was the best performing emerging Asian currency so far this year with a 4.2 percent gain versus the US dollar.
A sharp slowdown in July inflation also capped the Singapore dollar's upside.
WON
The won earlier strengthened past a resistance around 1,130 per dollar on demand from custodian banks as foreign investors bought Seoul shares.
Some traders suffered from stop-loss buying from their short positions in the won which they had built up based on expectations that the local unit was unlikely to strengthen past the 1,130 line with the 50 percent retracement at 1,130.1 of its depreciation early August.
Domestic importers initially bought dollars on dips for payments, but their dollar demand was not strong compared to previous sessions, dealers said.
Still, the South Korean unit failed to end the domestic trade firmer than the 50 percent retracement with the euro giving up some initial gains.
Foreign investors bought a net 89.8 billion won ($79.05 million) worth of stocks, extending their buying spree to a 13th consecutive session.
PHILIPPINE PESO
The Philippine peso strengthened to 42.155 per dollar as traders covered short positions in the local unit and added bullish bets on the currency on hopes for the Fed's easing.
But the peso gave up some of initial gains as traders cut the bullish bets after weak HSBC Flash China PMI.
A sluggish China economy may spur expectations that Beijing may carry out more stimulus, but the hopes may not support the peso much, a European bank dealer in Manila said.
"Until we see that happening, the market will continue to trade the headlines," said the dealer.
BAHT
The baht hit 31.250 versus dollar, its strongest since May 14, breaking a nearly three-month consolidation.
The Thai currency may strengthen further to 31.218, a 200-day moving average if it ends the day firmer than the 38.2 percent retracement at 31.271 of its depreciation between February and June.
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