Emerging Asian currencies were mixed on Wednesday as cautious investors waited for clues about the future of the European Central Bank's asset-purchase programme from a policy meeting that is to be held this week. The Chinese yuan eased as the People's Bank of China set its daily guidance weaker, reflecting the dollar's broad strength amid the euro's loss.
By contrast, Indonesia's rupiah hit a three-week high as foreign investors sought one of the highest bond yields in Asia. The South Korean won gained on demand from foreign investors, tracking higher government bond prices. There are expectations that the ECB would change the terms of its asset-buying programme to alleviate a shortage of bonds and extend the stimulus beyond its current end date in March 2017. The central bank meets on Thursday.
"If the ECB meets the expectations, that will ease concerns over a change in the central bank's stance. High-yielding bonds of Asian countries such as Indonesia will see some inflows," said Seungwon Kang, a fixed-income analyst at NH Investment & Securities in Seoul. "Some of them already benefited as their currency depreciation slowed down amid doubts over the dollar's further strength."
The greenback has been broadly correcting as its recent gains backed by US President-elect Donald Trump's policy stance were seen excessive. The rupiah rose as much as 0.5 percent to 13,310 per dollar, its strongest since November 15. Most of Indonesia's government bond prices advanced with the 10-year yield at a two-week high of 7.893 percent.
Indonesia sold 6.2 trillion rupiah ($464.9 million) worth of bonds at an auction, in line with the indicative target, the finance ministry said on Tuesday. Total incoming bids were 29.3 trillion rupiah. Foreign investors increased 3.9 trillion rupiah worth of the government bonds in the first five days of this month. The won advanced as South Korea's 10-year government bond yield slid to 2.197 percent from the previous close of 2.205 percent. Foreign investors were set to buy Seoul shares for a second session. "Investors appeared to have some hope on the ECB. Given potential shocks on the global market, the ECB is unlikely to taper," said an interest rate trader at a foreign bank in Seoul.