ET:Rupee, won hit 2-week highs; investor caution remains
SINGAPORE: The 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.
Ji also said a widening gap between large and smaller companies in China suggested there would not be a sustained recovery in manufacturing activity in coming months.
"I am a little cautious as Q1 Chinese economic data will be weaker than in the preceding quarter. I will be more confident in buying Asia ex-Japan currencies coming into the second quarter when the cyclical outlook turns a little better."
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.
"If you are trading the markets now, it would be foolish to expect a break out just yet."
Emerging Asian currencies weakened in March on worries about a slowing global economy, especially a possible hard landing in China.
But they have appreciated so far this year and their long-term outlook stays bright, given ample liquidity provided by major central banks' policy easing, market participants said.
