The South Korean won and the Malaysian ringgit rebounded on Wednesday after the Federal Reserve pledged to keep interest rates near zero until 2013, prompting investors to cautiously return to riskier assets after heavy selling in recent sessions.
The won ended up 0.8 percent against the dollar, after briefly weakening on reports that North Korea had fired artillery into disputed waters near South Korean island. It recouped those losses after another report that the incident appeared to be a training exercise.
A rebound in battered Asian stock markets also lent support to regional currencies, though analysts were not sure how long the equity bounce would last amid festering debt problems in the United States and Europe and fears that the US economy could tipback into recession.
Another round of easing by the Fed would give a further boost to emerging Asian currencies eventually, but that may be counterbalanced to some extent by a pause in regional rate tightening as policymakers shift their focus from inflation to the slowing global economy. The won rose but ended off the day's highs as foreign investors kept selling Seoul shares and on importers' dollar demand.
The ringgit rose after managing to hold above its 200-day moving average on Tuesday and after data showed Malaysian industrial production rose marginally in June from a year earlier, better than expectations of a contraction. The Malaysian currency found strong support at the 200-day moving average of 3.0443.
Standard Chartered said it buys the baht against the dollar and the euro, saying the Thai currency has not been bought as heavily by investors as other Asian currencies. Thailand's domestic fundamentals remain strong with the central bank seen continuing to raise rates and the current account balance seen staying in surplus, StanChart said. The baht has been strengthening versus the dollar and the euro since late June and early July, respectively, on hopes that the July 3 general election would ease Thailand's political uncertainty.