Most Asian currencies gained on Monday as a surprise improvement in China's factory activity boosted confidence in regional assets, reversing more pressing concerns about the impact of a broader economic slowdown.
Factory activity in China unexpectedly grew for the first time in four months in March, a sign government stimulus may be starting to take hold in the world's second largest economy.
"While a single data point is insufficient to declare that the worst is behind us, we should see more signs of stabilisation as Chinese stimuli takes hold," DBS said in a note.
The encouraging data supported a 0.1 percent gain in China's yuan to 6.706 a dollar, which in turn supported currencies that tend to track the Chinese unit.
The Philippine peso was the top gainer on the day, rising 0.3 percent against the greenback to 52.510. The Singapore dollar and South Korean won strengthened 0.2 percent and 0.3 percent, respectively.
As investor confidence returned, the allure of the dollar's safe-haven appeal waned against a basket of its key rivals , falling 0.1 percent.
The Thai baht edged higher. Headline consumer prices rose 1.24 percent year-on-year in March, topping forecasts in a Reuters poll but remaining at the lower end of the central bank's 1-4 percent target range.
Elsewhere, annual inflation in Indonesia slowed a little more than expected in March, slipping below the central bank's target range for the first time in three years.
The rupiah also edged higher, up 0.1 percent to 14,225 per dollar.
Currency and bond markets in India were closed for annual account closing of banks.
CHINA CHEER
If sustained, the improvement in business conditions in China could indicate that manufacturing is on a path to recovery, easing fears that China could slip into a sharper economic downturn.
"We expect more signs of activity recovery in the coming months, as fiscal easing kicks in," wrote Julia Wang, a greater China economist at HSBC.
"Its recovery also suggests that some export businesses, which have been fearing the worst, are seeing businesses normalising to some degree," she added, but cautioned that the external environment will remain challenging this year.
Other analysts also cited the need to quell exuberance and view the upbeat data cautiously.
"As any good statistician (and economist) will warn, one data point does not confirm a trend; and so it is too early to be positive, even if optimists get hopeful," Mizuho Bank said in a note.
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