The Malaysian ringgit and the Singapore dollar climbed to multi-year peaks against a broadly weaker U.S. dollar on Monday, after the yen extended gains as investors remained on high alert for a possible intervention to support the Japanese currency.
The yen extended its Friday surge, weighing on the U.S. dollar and pulling Asian currencies higher, with the MSCI index of emerging market currencies rising 0.6% to an all-time high.
Investors were also trimming dollar positions ahead of a Federal Reserve meeting and possible announcement of a new Fed chairman.
The Fed is broadly expected to stand pat on rates on Wednesday. The dollar index, which measures the greenback against six currencies, fell 0.4% to a four-month low.
"We may be on the brink of a sustained breakdown in the broad US dollar index," said Lloyd Chan, a senior currency analyst with MUFG.
"On the back of a weaker dollar backdrop, we are seeing broad-based strength across Asian currencies."
The Malaysian ringgit extended gains, surging 0.9% to 3.968 per dollar - its highest level since June 2018. The ringgit is among Asia's strongest performing currencies this year.
The central bank held rates last week and affirmed that last year's growth momentum would seep into the year ahead, raising optimism towards the currency and Malaysia's economy.
Singapore's dollar strengthened to its strongest level since late-October 2014 and was last at 1.2682 per U.S. dollar, ahead of a central bank policy review. The Monetary Authority of Singapore (MAS) is expected to leave monetary policy unchanged on Thursday, with the growth outlook supported by strong demand for semiconductor exports and inflation seen under control.
MUFG's Chan said the MAS' policy stance will help support the local dollar. He said the currency is at a "pivotal technical level", where it could gain towards 1.2600-1.2650 per U.S. dollar should the greenback weaken further.
The South Korean won, which had lost more than 2.5% in the first three weeks of the month, firmed 1.6% to trade at a three-week high. The Indonesian rupiah rose 0.2% to 16,780 per dollar.
The rupiah has gained for four straight sessions after touching a record low of 16,985 last Tuesday, with the dollar weakness and currency stabilisation assurances from the central bank providing respite for one of Asia's weakest performing currencies.
Among equity markets, Taiwan notched a record closing high, while South Korea's KOSPI closed 0.8% lower, although the East Asian benchmarks have added double-digit gains so far this month on an AI-driven rally.
Malaysian shares rose 1.2% to their highest level since mid-October 2018.
HIGHLIGHTS:
** US, South Korea agree to deepen cooperation on nuclear-powered subs, Seoul says
** South Korea mourns death of former prime minister who nurtured democracy
** Death toll from landslide in Indonesia's West Java rises to 17 - Reuters
