The Indonesian rupiah and Malaysian ringgit led an emerging market currency surge against the dollar in Asia Thursday, while stock markets also rallied after more weak US data fuelled hopes the Federal Reserve will delay an interest rate hike.
High-yielding, or riskier, assets snapped back after a two-day sell-off that came on the back of renewed concerns that China's economic growth crisis will seep through to other countries.
Equity and currency markets have enjoyed a broad advance so far in October after enduring the worst quarter for four years in July-September, with most of the gains coming from speculation the Fed will keep borrowing costs on hold.
On Wednesday the Commerce Department said retail sales rose half as much as expected in September while it also revised down its August result.
Also Wednesday the Fed's closely watched Beige Book report on the economy said that while expansion continued modestly the stronger dollar in recent months was "restraining manufacturing activity as well as tourism spending".
The news comes after a below-par jobs report at the start of the month and adds to a sense that the world's biggest economy is stuttering, giving the Fed more reason to hold off a rate rise.
With borrowing costs expected to remain at record lows in the near future investors moved into riskier assets. The rupiah surged 2.4 percent and the ringgit rallied 2.2 percent against the dollar. South Korea's won was 1.2 percent higher, while the Taiwan dollar and Thai baht each gained 0.5 percent.
- 'No reason to raise rates' -
"What you’re seeing in the movement right now is an unwind of the bullish-dollar story," Douglas Borthwick, head of foreign-exchange at New York brokerage Chapdelaine & Co, told Bloomberg News.
"The Fed has no reason to raise rates when you’re getting the data that we’ve been getting lately."
Emerging market currencies have suffered heavy selling over the past year as the Fed was expected to lift rates, with dealers shifting into the United States looking for higher and safer returns.
"The US dollar index was drifting lower for much of the day yesterday, but the move was compounded by the release of disappointing US retail sales data," Kymberly Martin, a senior market strategist at the Bank of New Zealand, said.
"In the detail the disappointment appeared genuine, likely emboldening doves within the US Fed."
The greenback was also under pressure against its major peers. In New York Wednesday it fell to 118.88 yen while the euro hit $1.1469, compared with 119.68 yen and $1.1385 in Asia earlier in the day.
On Wednesday it was at 119.00 yen and the euro bought $1.1472.
Hopes for a continued low Fed rate provided support to regional stock markets, with Hong Kong -- where monetary policy is tied to US policy -- climbed one percent.
Bargain buying also helped equities rally following broad losses on Tuesday and Wednesday after weak Chinese trade and inflation data reignited worries about the world's number two economy.
Seoul was 1.22 percent higher, Tokyo added 0.77 percent by lunch and Sydney gained 0.33 percent.
Shanghai rose 0.67 percent, with dealers buoyed by hopes Beijing will unveil more economic stimulus measures.