Asian currencies gains

The Philippine peso, South Korean won and Singapore dollar managed small gains on Monday as investors cautiously returned after central banks across the world supplied funds to troubled credit markets.
Major central banks injected billions of dollars in overnight funds on Thursday and Friday and reassured markets of their support if there was a cash crunch as credit conditions deteriorated. The Bank of Japan provided funds on Monday and the European Central Bank said it would, too.
The peso gained nearly half a percent to 45.52 per dollar and the won rallied 0.3 percent to 928 per dollar after South Korea's finance ministry said the government would act pre-emptively to avert any fallout on local markets. The Singapore dollar, considered a relatively safe haven in Asia, also gained a quarter of a percent.
But the Indonesian rupiah, Asia's highest-yielding currency, stayed weak near one-year lows at 9,345 per dollar. The Taiwan dollar barely moved. Central banks in Malaysia, Indonesia, the Philippines and Taiwan were suspected of selling dollars to support their currencies on Friday.
"I am still cautious. It is so difficult to read the situation," said one trader in Manila on Monday. "I sold a few dollars, but just to have a position and just to play the range between 45.50 and 45.75 for now," he said, referring to trades in the peso.
Still, investors were wary of taking on risk as central bankers warned of possible further volatility in financial markets. Japan's economics minister, Hiroko Ota, said she would track the impact of the troubles in the US subprime mortgage sector on the US economy and oil prices.
Australian central bank Governor Glenn Stevens said the US mortgage market situation could deteriorate in the coming year and warned of the risk of a slowdown in the US economy.
"It's quite possible that things could still get a bit worse before getting better. The contagion of this credit issue is starting to be felt even in Asia," Thio Chin Loo, a currency strategist at BNP Paribas, said.
Stock markets in Asia mirrored that uncertainty. Indexes in Thailand and Indonesia were lower while those in South Korea and Hong Kong managed small gains. Thio said it was not certain that the central banks' actions would contain the volatility. "I would be hesitant to say that things have passed the worst but, as it stands, a lot of it is sentiment-driven and it's very hard to determine how sentiment shifts from day to day.
"At this moment, certainly, markets are taking a very short term and cautious approach," she said. Analysts at J.P. Morgan said that while there were short-term risks to regional currencies owing to deepening aversion to risk and likely weakness in equity markets, they would not alter their longer-term bullish views on Asia.