[TOKYO] The US dollar fell against emerging market currencies in Asia on Wednesday as worries over China's economy faded and investors awaited fresh input from the Federal Reserve on its timeline for an interest rate hike.
The Malaysian ringgit and the Indonesian rupiah booked solid gains against the greenback as a commodity price recovery pushed equity markets into positive territory.
The South Korean won, the Taiwan and Singapore dollars and the Thai baht were also up against the US currency.
But the dollar gained against Japan's currency, rising to 121.19 yen (S$1.397) from 121.03 yen Tuesday in New York.
Expectations remain that the Japanese central bank may need to increase its bond-buying programme to further stimulate the country's slumping economic growth and weak consumer prices.
The euro, meanwhile, dropped to US$1.0948 from US$1.0959 but showed continued strength against the yen, edging up to 132.68 yen from 132.64 yen.
High-yield, riskier assets have taken a big hit this year on fears of a flight of capital back to the United States as traders look for better, safer investments.
But the dollar suffered a heavy sell-off against emerging currencies in October, as concerns about the world's top economy boosted the argument the Fed would delay a rate hike until 2016.
"We still have some uncertainties over when US interest rates will start to climb, but it seems the clouds of pessimism around China's economy are starting to clear," chief market strategist Michael McCarthy of CMC Markets Plc told Bloomberg News.
"It's unlikely we'll see a hard landing in China. There's been demonstrated commitment from authorities in China to underpin the economy. We're certainly seeing good support for risk assets." Many economists say the Fed's interest rate hike could come sometime next year, citing weakness in the US economy - including last week's soft data on consumer spending - and ongoing worries about the global economy, namely China's ongoing slowdown.
That, in turn, boosts the case for a later rate lift-off and bolsters emerging currencies.
The ringgit added 0.60 per cent, while the Indonesian rupiah rose 0.62 per cent. The won gained 0.37 per cent and the Taiwan dollar advanced 0.56 per cent.
The Thai baht was up 0.13 per cent, while the Singapore dollar traded 0.12 per cent higher.
The US dollar strengthened against the yen on hope of further action by the Bank of Japan after it held the trigger on extra stimulus last week.
"The US is the only one that is ready to hike," Koon How Heng, senior foreign exchange strategist at Credit Suisse Group AG's private banking and wealth management unit, told Bloomberg News.
"The rest of the world is either neutral or dovish. That supports the positive dollar view." Investors are now looking ahead to Fed Chair Janet Yellen's congressional testimony Wednesday and fresh US employment and trade figures.