SINGAPORE: Most emerging Asian currencies rose on Monday amid hopes for stimulus moves by the Federal Reserve and steps by the European Central Bank to tackle the debt crisis, while weak economic data in Asia raised expectations for easing in the region.
The Malaysian ringgit outperformed regional peers on catch-up plays, while inflows and exporters supported the South Korean won and the Taiwan dollar. Thai exporters lifted the baht.
Going against the trend, the rupiah fell even though Indonesia reported a surprisingly narrower trade deficit in July, thanks to slower-than-expected imports. Traders said the fall was due to bond outflows.
The strengthening of other Asian currencies came as regional stocks rose after Fed Chairman Ben Bernanke kept the door open for more easing if needed.
On Friday, Bernanke said stagnation in the US labor market was a "grave concern," although he stepped short of providing a clear signal of imminent action.
"Bernanke did sound more dovish pointing to a higher chance of QE3, so risk assets are supported" said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong, referring to a possible third round of the Fed's quantitative easing, or bond buying programme.
Still, Cheung, along with other analysts and dealers, saw gains in emerging Asian currencies as limited due to a slowing global economy.
"I think today's rally is likely to be short lived," said Cheung, given sluggish regional economies with softening domestic and external demand.
China's manufacturing sector has been badly hit by slowing new orders, two surveys showed, a sign that the pace of growth in the world's second largest economy will weaken well into the third quarter. Data also showed that the slowdown is denting South Korean exports.
Such grim economic pictures are expected to allow emerging Asian currencies to enjoy only "marginal gains," said BNP Paribas currency strategist Thio Chin Loo in Singapore.
"China is the negative that makes people cautious on Asia. Exports also remained poor with major economies slowing, so local central banks will act to limit their currency appreciation," she added.
After Bernanke's comments, investors are looking to US economic data such as August non-farm payrolls due on Friday, which may justify further Fed stimulus, especially after some recent healthy indicators.
The ECB's policy meeting on Thursday is another focus as President Mario Draghi in late July pledged to do whatever necessary to save the euro.
Last month, emerging Asian currencies were mixed with investors keeping an eye on central banks of the both sides of Atlantic.
RINGGIT
The ringgit tried to clear 3.1120 per dollar, the 50.0 percent Fibonacci retracement of the local unit's depreciation in late August on catch-up buying.
Malaysian financial markets were closed for a holiday on Friday when most Asian peers gained.
But local interbank speculators hesitated to lift the ringgit further around 3.1100, its strongest on Aug. 28 and Aug 29.
WON
The won strengthened past the 50.0 percent retracement at 1,131.1 per dollar of the South Korean currency's weakening last month.
The local unit found support from inflows related to foreign investors' purchase of Daewoo International's stake in unlisted Kyobo Life Insurance, dealers said. Domestic exporters also bought the won.
Still, investors did not expect the South Korean unit to extend gains, given growing signs of an economic slowdown.
South Korea's manufacturing activity shrank for the third month in a row in August, a private sector survey showed, while annual inflation slowed to a fresh 12-year low, according to government data. In August, exports had their sixth month of annual decline this year.
Reflecting the caution, offshore macro funds initially sold the local currency, dealers said, despite Bernanke keeping the door open for further stimulus.
The won failed to touch the 61.8 percent retracement at 1,129.4 as importers bought dollars.
"We need to see if the Fed moves or not later this month. Until then, I don't think the won would rise much further," said a senior foreign bank dealer in Seoul.
TAIWAN DOLLAR
The Taiwan dollar advanced on some inflows from foreign financial institutions backed by expectations of a QE3 by the Fed.
Firm domestic stocks and exporters' demand for settlements also supported the island's currency, dealers said.
But traders did not chase the Taiwan dollar further before the ECB's policy meeting on Thursday and US August job data on Friday.
BAHT
The baht gained on exporters' demand for settlements and as the Singapore dollar recovered earlier losses.
The Thai currency faced technical resistance at a 200-day moving average, which currently stands at 31.218 per dollar.
RUPIAH
The rupiah fell as foreign banks sold the Indonesian currency, which dealers said was linked to bond outflows.
The central bank was spotted selling dollars to prevent the rupiah from weakening past 9,600 per dollar, dealers added.
Despite continuous intervention, the Indonesian unit is staying under pressure, they said.
"The dollar demand (on bond outflows) will still be here for some time," said a Jakarta-based dealer.
Indonesia's trade deficit in July surprisingly narrowed from a record gap in June, though trade weakness is expected to keep the rupiah under pressure.
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