SINGAPORE: Emerging Asian currencies rose on Thursday as concerns over capital outflows eased after Federal Reserve Vice-Chair Janet Yellen suggested that US economy may need stimulus longer than market expectations indicate.
Regional currencies such as the South Korean won and Malaysia's ringgit advanced on short-covering. Indonesian exporters' demand lifted the rupiah.
Asian stocks bounced from six-week lows as Yellen, President Barack Obama's nominee to head the US central bank, said the Fed has "more work to do" help the world's largest economy, indicating she was in no hurry to start scaling back the Fed's bond-buying programme.
Still, global markets stayed vigilant ahead of Yellen's testimony before the Senate Banking Committee later in the day.
Some traders and analysts did not give up expectations of the Fed tapering, given the recent strong US economic data including October jobs data.
Yellen's remarks provided chances to sell emerging Asian currencies versus the dollar on rallies, some analysts said.
"The risks still seem that US data can come out stronger relative to expectations and I think that keeps US bonds under pressure and yields still reasonably well-elevated," said Jonathan Cavenagh, senior FX strategist with Westpac in Singapore.
"I find it hard to see USD/Asia falling a great deal under that scenario. We may see a range-bound environment but bias is to buy USD/Asia on dips."
WON
The won rose on stop-loss dollar selling, while dollar demand from local importers limited the currency's upside.
Foreign investors were set to extend their selling streak in Seoul's main stock market to a ninth consecutive session. During the period, foreigners sold a net 854 billion won ($796 million) worth of shares, according to the Korea Exchange.
Investors also stayed wary of possible intervention by the foreign exchange market to stem the won's strength beyond 1,060 per dollar.
"The won is more likely to turn weaker, although Yellen's comments tonight will decide its direction," said a senior foreign bank trader in Seoul.
The won did not move on the central bank's widely-expected decision to keep its policy interest rate unchanged.
RINGGIT
The ringgit advanced on short-covering after its one-month non-deliverable forwards strengthened to the greenback overnight.
Still, traders hesitated to chase the Malaysian currency ahead of Yellen's testimony later in the day.
"If she is firm in the QE, the dollar will fall back a bit more," said a senior Malaysian bank trader in Kuala Lumpur, referring to the Fed's quantitative easing.
"But if not, dollar bulls will try to long dollar/ringgit around 3.18," the trader added.
RUPIAH
The rupiah appreciated on exporters' demand for settlements and investors cut bearish positions, traders said. Local shares jumped 1.6 percent, outperforming most regional stocks.
The forward onshore market, or Jakarta Interbank Spot Dollar Rate (JISDOR), was fixed at 11,546 per dollar, compared with the previous 11,644.
Indonesia's current account deficit narrowed in the third quarter. The contraction was less than expected and not enough to end concerns over Indonesia's vulnerability to more capital outflows when the Fed starts dialing down its stimulus.
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