The South Korean won and the Malaysian ringgit posted their best gains in 11 months on Thursday, leading other emerging Asian currencies higher, as investors returned to riskier assets and the euro rebounded above a key pivot level.
Short-term speculators entered fresh dollar-short positions against emerging Asian currencies, despite lingering worries about the euro zone's debt crisis with Greece fighting to avoid a debt restructuring that could have a huge ripple effect across other European countries struggling with gaping fiscal deficits.
The rebound in the euro, especially a move above a key pivot level of $1.4150, may help the regional currencies, but it is premature to conclude an end of corrections yet, dealers and analysts said. The won posted its biggest daily percentage gain in 11 months as local interbank and offshore funds cleared dollar-long positions to stop losses. The won closed local trade up 1.24 percent against the dollar, the largest since June 21, 2010, according to Reuters calculations.
On Wednesday, the local currency threatened to weaken past a major support line of 1,102 of its highs versus the greenback during November-February. With the Thursday's gain, the support line becomes stronger and the won may strengthen more if the euro rebounds more. The ringgit also poised to post its biggest daily percentage gains in 11 months as short-term speculators entered dollar-short positions and on stop-loss dollar sales.
The Malaysian currency also found support from demand linked to fixing. The ringgit gained 0.8 percent against the dollar, the biggest daily gain since June 28 last year, according to Reuters calculations. The Singapore dollar gained as overnight US dollar long positions were bailed out when the city-state currency strengthened past 1.2460 per the greenback.
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