Rupee leads Asia forex gains on China stabilisation hopes

Reuters

By Jongwoo Cheon

SINGAPORE (Reuters) - The Indian rupee led gains in emerging Asian currencies on Tuesday as investors hoped that further data from China would add to evidence that the world's second-largest economy is stabilising.

Sentiment was also lifted by easing concerns of a U.S. military strike against Syria, which saw crude oil prices retreat.

President Barack Obama said Russia's proposal to put Syria's chemical weapons under international control "could potentially be a significant breakthrough," but remained sceptical and pushed ahead for Congress to back potential U.S. action.

The rupee hit a two-week high.

The Philippine peso hit its highest in more than three weeks on demand from real money funds, and the Malaysian ringgit advanced on short-covering.

Stock inflows lifted the Taiwan dollar and the South Korean won to their highest in months, although official intervention limited their upside, traders said.

Regional shares advanced to three-month high before Chinese industrial output and retail sales later in the day. Solid trade and muted inflation numbers have already boosted hopes that a severe slowdown in the economy may have been avoided.

"The behavior in regional currencies is to some degree is influenced by the 'elephant in the room, represented by China's economic situation," Scotiabank said in a client note.

"The impact is driven not only by pure market sentiment towards regional growth dynamics, but also via trade channels, as countries like Korea and Taiwan see trade accounts supported by China directly, or by the same Western demand driven supply chain that benefits China."

Adding to further support to emerging Asian currencies, the dollar fell after last week's disappointing U.S. jobs data increased uncertainty over whether the Federal Reserve will start tapering its stimulus this month and if so by how much.

PHILIPPINE PESO

The peso rose as much as 0.8 percent to 43.881 per dollar, its strongest since August 16 on demand from real money funds and local banks.

Philippine exports in July rose 2.3 percent from a year earlier, more than some analysts had expected, with overseas shipments of electronics jumping 11.2 percent, the highest growth in eight months.

Manila shares (.PSI) rose some 2 percent, outperforming most other regional markets.

The Philippine currency's upside was limited on dollar demand from local companies. But it is seen strengthening further after breaking through 44.00, traders said.

"We will have a bit of the dollar/peso's bounce back to around 43.980. But as long as we stay below 44.00, we could see another attempt lower," said a Philippine bank trader in Manila.

Another trader said the peso is expected to strengthen to 43.820, its session low of August 16.

RINGGIT

The ringgit rose as investors covered short positions against the U.S. dollar and the Singapore dollar.

Against the greenback, the Malaysian currency strengthened past 3.2754, the 76.4 Fibonacci retracement of its weakness earlier this month.

The next resistance level is 3.2585, the session high of September 3.

The ringgit gained up to 0.8 percent to 2.5719 to the Singapore dollar.

TAIWAN DOLLAR

The Taiwan dollar advanced as much as 0.6 percent to 29.655 to the U.S. dollar, its highest since June 7, on sustained inflows from foreign financial institutions for local stocks.

The central bank was spotted buying small amounts of greenbacks to smooth volatility around 29.660-29.670, limiting the Taiwan dollar's upside, traders said.

Such intervention caused investors not to chase the island's currency, while foreign financial institutions are likely to take a breather, traders said.

WON

The won earlier rose 0.5 percent to 1,081.8, its highest since February 28, as foreign investors extended a buying spree to a 13th consecutive session in Seoul's main stock exchange (.KS11).

Offshore funds and local exporters also chased the won, traders said.

South Korea's foreign exchange authorities were spotted intervening, probably to prevent it from strengthening past 1,080, traders said.

The won has the 76.4 percent retracement at 1,080.2 of its depreciation between January and June.

The intervention came as the won rose to 10.8390 to the yen, not far from a near five year high of 10.7338 hit in May.

Still, the won is expected to stay firm, given sustained demand from offshore funds and exporters, traders said.

"The authorities need to strengthen a resistance area around 1,080, otherwise market force will keep lifting the won," said a senior foreign bank trader in Seoul.

Once the won strengthens past 1,080 per dollar, it may head to 1,076, around its February high.

CURRENCIES VS U.S. DOLLAR

Change on the day at 0430 GMT

Currency Latest bid Previous day Pct Move

Japan yen 99.61 99.57 -0.04

Sing dlr 1.2685 1.2692 +0.06

Taiwan dlr 29.669 29.825 +0.53

Korean won 1084.95 1086.80 +0.17

Baht 32.06 32.16 +0.31

Peso 43.93 44.24 +0.72

Rupiah 11140.00 11170.00 +0.27

Rupee 64.30 65.24 +1.47

Ringgit 3.2690 3.2935 +0.75

Yuan 6.1194 6.1210 +0.03

Change so far in 2013

Currency Latest bid End prev year Pct Move

Japan yen 99.61 86.79 -12.87

Sing dlr 1.2685 1.2219 -3.67

Taiwan dlr 29.669 29.136 -1.80

Korean won 1084.95 1070.60 -1.32

Baht 32.06 30.61 -4.52

Peso 43.93 41.05 -6.55

Rupiah 11140.00 9630.00 -13.55

Rupee 64.30 54.99 -14.47

Ringgit 3.2690 3.0580 -6.45

Yuan 6.1194 6.2303 +1.81

(Additional reporting by Lin Miao-jung in TAIPEI and IFR Markets' Catherine Tan; Editing by Kim Coghill)

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