Asian currencies pare losses

Gains in regional stock markets helped Asian currencies trim losses on Tuesday but worries over high oil prices remained after Iran, the world's fourth-largest oil exporter, said it would press on with its nuclear programme.
"Equities is one reason," said a trader in Singapore, referring to a recovery in Asian currencies. "There is also a lot of options-related trade going on today so that has been driving the market."
The yen, which was weaker both against the US dollar and the euro also, set the tone for Asian currencies. It was undermined by concerns over its low yields and widening interest rate differentials.
The European Central Bank is expected to raise rates again after bringing rates up to 3 percent earlier this month, while the Bank of Japan is likely to lift rates only gradually after a rise to 0.25 percent last month, its first increase in six years.
Oil traded above $72 per barrel on Tuesday after rising more than $1 on Monday. Iran is expected to respond on Tuesday to a package of incentives from the six world powers that aim to end a nuclear stand-off.
"Oil prices are up again. It's quite uncertain so it's being a drag on Asian currencies," said Irene Cheung, a regional economist at ABN Amro Bank. Apart from the yen factor, a dealer at a commercial bank in Thailand said the Thai baht tested the downside after the Bank of Thailand intervened last week in the range of 37.40-37.45 per dollar to slow the currency's rise.
The baht has been the strongest in the region this year, driven by foreign portfolio inflows, a strengthening current account and, more recently, signs of a resolution to the country's political stalemate. The market was looking forward to news by Thursday of the appointment of members of a new election commission that will pave the way for a general election on October 15.
The Taiwan dollar recovered after being down most of the day. "The stock market was up, volume was down but foreigners were selling, not buying any more," ABN Amro's Cheung said. Taiwan had net equity outflows of $16.6 million for the first time in more than two weeks, stock exchange data showed.
Nomura International said foreign investors were net buyers of $1.4 billion of Asian equities last week, the highest in 15 weeks. Only South Korea and the Philippines recorded net outflows. Foreign investors have been net sellers in South Korea for six weeks in a row, Nomura said. Cheung said the Taiwan dollar, which reached a one-week low of 32.774 per US dollar, would remain pressured by local political problems as a campaign to oust Taiwan President Chen Shui-bian gathers steam.