Most Asian currencies rose on Wednesday but near-term gains may be limited by worries about Spain's surging borrowing costs and fears that weekend elections in Greece could lead to more market turmoil. Spanish 10-year bond yields hit their highest in the history of the eurozone this week, fuelling worries over whether Madrid will be able to keep tapping bond markets after a banking bailout.
Market players are also concerned about a renewed rise in Italian 10-year bond yields ahead of debt auction on Thursday. Austria's finance minister said Italy may need a financial rescue because of its high borrowing costs, drawing a sharp denial on Tuesday from the Italian prime minister.
"With Spain and Italy concerns lingering and the Greece election around the corner, dollar/Asia will be very well supported," said Enrico Tanuwidjaja, a currency strategist at Maybank in Singapore. The dollar dipped 0.2 percent against the Malaysian ringgit to 3.1795, but remained above an intraday low of 3.1680 based on indicative prices.
"We think dollar/Asia will remain largely flattish into the end of the week ahead of the Greek elections," said Emmanuel Ng, foreign exchange strategist at OCBC Bank in Singapore, adding that offshore investors seem cautious about putting money into Asian assets at this juncture. The peso hit a one-month high roughly around 42.70 to the dollar at one point. Local exporters have been persistent sellers of the dollar against the peso over the past few days, and that has helped to give the peso a boost, said a trader for a major Japanese bank in Singapore.
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