The South Korean won firmed sharply on Tuesday, supported by easing trade tensions with Japan and strong demand for local chip stocks, while most other Asian currencies were subdued as investors sought clarity on the Sino-US trade deal.
Leading gains in the region, the won rose 0.6 percent to its strongest level since Nov.18.
The move was in tandem with the domestic equity benchmark index, where chipmakers such as Samsung Electronics and SK Hynix logged robust gains.
A recovery in the semiconductor industry, receding fears of the Sino-US trade war and hopes of a reconciliation between Japan and South Korea supported risk-on proxies like the won, Christopher Wong, senior FX Strategist at Maybank Singapore said.
Japan and South Korea on Monday said they had reached “common ground” in their first trade talks since Tokyo imposed curbs on exports of high-technology materials to South Korea.
“Inventory drawdowns as well as improving demand environment led by increase in orders for 5G network deployment, cloud providers and Internet of Things supports a cyclical recovery story,” Wong said, referring to the gains in chipmakers.
Among other regional currencies, the Taiwan dollar strengthened 0.4 percent, with analysts attributing the gain to an improved growth and export outlook for the trade-reliant island due to reshoring.
The Chinese yuan was marginally lower.
While Washington has touted the Sino-US trade deal, saying it has been “absolutely completed”, Chinese officials have been more cautious, emphasizing that the trade dispute has not been completely settled.
The Thai baht and Philippine peso weakened 0.2 percent and 0.1 percent, respectively.
Markets will now focus on the Bank of Thailand’s policy meeting on Wednesday, where it is widely expected to leave its benchmark interest rate at a record low after two cuts this year, a Reuters poll showed.
The Singapore dollar wavered between positive and negative territory. Data earlier in the day showed the city-state’s exports fell again in November, pressured by an extended decline in electronics and pharmaceutical shipments. – Reuters