SINGAPORE, Feb 11 — Emerging Asian currencies took a breather today as traders chose caution over valour ahead of a keenly-anticipated testimony from the new head of the US Federal Reserve.

The Singapore dollar outperformed its counterparts, racing to a 16-year high against the ringgit. It also led gains on the US dollar as the city state’s triple-A credit ratings attracted safe-haven flows.

For the most part, however, investors kept to the sidelines as Fed Chair Janet Yellen is set to speak before the House Financial Services Committee later in the day.

The assumption is that Yellen will be upbeat on the US economy but emphasise that rates will remain low for an extended period.

“Markets expect the first female Fed Chair to stick to the dovish script and avoid unsettling sentiments,” Maybank said in a research note.

Maybank’s FX research head Saktiandi Supaat expected such a stance to be more beneficial to emerging Asian currencies.

Still, the general view among traders is that the region’s currencies would not rise much further unless Yellen suggests that the Fed may slow down the pace of its stimulus-tapering.

“If Yellen does not become more dovish, the dollar will rebound and put pressure on Asian currencies,” said Yuna Park, currency and bond analyst at Dongbu Securities in Seoul.

“Asia is better placed than other developing countries, but Asian currencies are not immune to outflows from emerging markets,” Park added.

Singapore dollar/ringgit

The Singapore dollar rose as much as 0.4 per cent to 2.6328 to the Malaysia ringgit, its highest since January 1998.

The city-state’s currency is seen extending its gains against its neighbour as sentiment on the ringgit remains weak, traders said.

“Most investors are looking to sell the ringgit on rallies, while the central bank is almost the only player to buy it,” said a European bank trader in Singapore.

Investors were also cautious ahead of Malaysia’s fourth-quarter growth data due tomorrow.

Malaysia’s economy is expected to have grown 4.8 per cent in the fourth quarter from a year earlier, compared to a 5.0 per cent expansion in the previous three months.

Taiwan dollar

The Taiwan dollar ticked up slightly after suspected intervention by the central bank pulled it down yesterday.

Exporters bought the island’s currency for settlements around 30.330 to the US dollar.

Still, foreign investors and local banks sold the Taiwan dollar, while importers bought the greenback for payments.

The won’s weakness also put pressure on the Taiwan dollar.

Some Taiwan companies compete with South Korean firms in overseas markets and the island’s central bank has been spotted intervening to prevent the Taiwan dollar from outperforming the won.

The South Korean currency eased as investors took profits after its recent gains. — Reuters