The currencies of Taiwan and Malaysia led advances among Asian peers on Monday, with sentiment lifted by hopes of a thaw in China-US trade tensions.
Bloomberg's gauge of Asian currencies hit a six-month high, with Taiwan's dollar jumping the most since 1988. Meanwhile, Malaysia's ringgit (RM) advanced to its strongest since October. MSCI's index of emerging market equities also gained.
The rally in regional stocks and currencies comes after President Donald Trump suggested the US may strike trade deals with some countries as soon as this week, offering the prospect of relief for trading partners.
"A lot of people are thinking we've moved on from the tariff escalation phase to the de-escalation phase and likely the negotiation phase as well," said Joey Chew, head of Asia FX research at HSBC Holdings. Given that Asian economies are very export focused, "what we're seeing in recent weeks is FX hedging flows rather than asset reallocation flows."
While the stiff tariffs announced by the Trump administration in early April roiled financial markets, they've since steadied amid signs that talks with Asian nations are progressing and trade tensions between China and the US are thawing.
See also: US-China trade talks to start this week focused on de-escalation
Underscoring the positive shift in sentiment is the huge turnover in Asian options and non-deliverable forwards. The South Korean won (KRW) and Taiwan dollar (TWD) ranked high among such contracts on Monday for a second session running, data compiled by Bloomberg show. That followed high turnover in Asian options and non-deliverable forwards going into the weekend.
The Taiwan dollar's biggest intra-day rally in more than three decades came after the government said on Saturday it had conducted first-round talks with the US, without revealing further details.
The monetary authority hasn't been seen actively intervening in the market on Monday, though it typically does so to smooth volatility. Taiwan's central bank will hold a press conference on the currency market later on Monday.
See also: EU targets EUR100 billion of US goods with tariffs if talks fail
Elsewhere, the Hong Kong Monetary Authority recently responded to weakness in the greenback by buying a record amount of dollars to defend its currency peg.
Markets in South Korea, Japan, Hong Kong and mainland China were closed for a holiday on Monday.
