The Philippine peso rose nearly half a percent and the Indonesian rupiah stabilised on Monday as markets paused in their selling of Asia's high-yielding assets, despite concerns about global equity and credit markets. The peso rose to 45.45 per dollar, rallying from the day's low of 45.88 - its lowest in two weeks.
The rupiah touched 9,200 per dollar, rebounding from 9,254 per dollar, its weakest point in nearly five months.
Both high-yielders had fallen in the past week during a global sell-off in risky assets and stock markets, driven by fear that a crisis in the US subprime mortgage market was turning into a broader credit crunch. "I reckon the market had turned too bearish on the high-yielders," said one Hong-Kong-based trader.
"Now other major currencies are rebounding versus the yen and the emerging high-yielders should also rise against the dollar." The yen, typically the funding currency for investors buying risky assets, came off a three-month high against the dollar. Several Asian stock markets moved higher on Monday.
Most people felt the pause in the scramble for safety would be temporary. Magnus Prim, chief Asia currency strategist at SEB, welcomed the sell-off as a much-needed correction in the price of some assets. "To be honest, it's a good reaction to see. Some of the valuations that we saw previously were quite stretched," he said.
Analysts felt the yen's rally and the unwinding of carry trades funded by cheap currencies still had some way to go.
On Monday, investors were buying back the yen even after Japanese Prime Minister Shinzo Abe's heavy defeat in upper house elections on Sunday. Other Asian low-yielders, such as the Singapore dollar and Taiwan dollar, were steady or even managed small gains. Meanwhile, currencies such as the South Korean won remained weak, staying near a one-month low at 924 per dollar.
"All eyes are on equity markets as we get to the end of month," said Sue Trinh of RBC Capital Markets. "People are suffering from sticker shock because of heightened risk aversion," she said. Trinh said RBC's risk aversion indicator had fallen by the end of last week to its deepest into risk averse territory since August 2002.
The Chicago Board of Trade's volatility index, or VIX, closed on Friday at its highest level since April 2003, near the trough of the previous bear market. "At some point, the sharp falls in the Aussie and Kiwi and yen strength will offer value for re-entering carry trades, but that point has not been reached yet as the prerequisite of stability in credit markets is clearly not in place," Trinh said.
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