Asian currencies gained against the dollar ahead of key U.S. jobs data on Friday, with the Indonesian rupiah hitting a two-month high, while stocks received a boost from China's upbeat economic report.
The rupiah rose 0.5% and was headed for its best week since early November as the country's recent economic output data hinted at a mild recovery and as foreign investors returned to its high-yielding debt.
Outflows, dividend repatriation pressure and concerns about Bank Indonesia's autonomy had seen the rupiah slump this year, but it recently found favour among yield-seekers as the Federal Reserve asserted a dovish stance.
As of last close, the yields on Indonesia's benchmark 10-year bonds were down 43.6 basis points from March highs. Yields fell 2 basis points to 6.435% for the day.
"Rupiah is catching up after the dovish Fed anchored a stable U.S. yield backdrop," Bank of Singapore FX analyst Moh Siong Sim said.
No expected change to BI's policy rate for the rest of the year and good performance at the recent government bond auctions is adding to the positive sentiment, he added.
However, OCBC analysts said near-term supply on the lighter side and the economic risk due to a resurgence in COVID-19 cases could support Indonesia bonds but its yields are likely to be rangebound.
The South Korean won had its best day in a week, while the Malaysian ringgit, Taiwan's dollar and the Singapore dollar firmed between 0.1% and 0.4% as the greenback eased.
U.S. payrolls data on Friday will likely confirm the economy's solid path to recovery from the pandemic, and even though it could potentially stoke inflation worries, so far the Fed has downplayed the risks of higher prices.
Meanwhile, Thailand and Taiwan shares jumped about 1% each, while Singapore's bourse rallied 0.8% after China's surprise export surge and solid services data for April cemented hopes of continuing economic recovery in the region's top trade partner.
(Reporting by Anushka Trivedi in Bengaluru; Editing by Vinay Dwivedi) ((Anushka.Trivedi@thomsonreuters.com; +918061823241;))