The Indian rupee and the South Korean won led gains among their regional peers on Tuesday, hitting two-week highs on strong manufacturing data from the United States and China, though ongoing caution over global growth limited their climb. The rupee started its first session of the new financial year on a firm footing thanks to bunched dollar inflows after a three-day weekend, while the won rose on stop-loss buying from offshore funds.
US manufacturing growth is picking up faster than expected, data showed on Monday, a day after China announced a surprise jump in activity at its large factories. That pushed up riskier assets such as shares and Latin American currencies on Monday, with US stocks marking a four-year peak.
But investors were cautious about spending too much on Asian currencies due to lingering doubts over the state of the global economy. "The devil is in the details. In the US (data), while production was up, new orders edged down," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.
Investors are focusing on China's first-quarter growth data next week, though they are also eyeing US job data on Friday and the minutes of the Federal Reserve's March 13 meeting, released on Tuesday. "There are some bets being put back on risk. But it is a short-term play still with no long-term trend at the moment," said BNP Paribas currency strategist Thio Chin Loo in Singapore. Dollar/won fell to 1,121.6, the lowest since March 20, breaking through a Fibonacci support level on stop-loss selling by offshore funds and local interbank players.
Some offshore model funds dumped the pair when it broke 1,123, near the 61.8 percent Fibonacci retracement of its March rise, at 1,123.3, dealers said. Custodian banks sold dollar/won and some exporters joined the sales, they added. It may head to 1,118.9, the 76.4 percent retracement, although it has minor support at 1,120.5, the low of March 20. Dollar/won is seen falling to 1,113.6, its March 9 low, if it clearly breaks the 76.4 percent level and its 200-day moving average, which currently stands at 1,118.1.
Interbank players sold dollar/ringgit and the pair tested support near 3.0400. US banks added to shorts on a break below 3.0500, while stale longs were stopped out at 3.0450. Short-covering ahead of 3.0400 limited slides. Dollar/ringgit has a 55-day moving average at 3.0418 and the 50 percent Fibonacci retracement of its February-March rise is at 3.0408. Once the support zone is cleared, it may head to the 61.8 percent retracement at 3.0291.
US dollar/Taiwan dollar dipped as foreign banks sold the pair. But Taiwanese importers bought on dips and local stocks fell, making other players hesitant to sell. Local dealers do not expect the pair to fall much further due to a lack of momentum in the island's stocks.