The Singapore dollar hit a record high and the Malaysian ringgit broke through a key resistance level on Tuesday, leading Asian currencies higher, as investors feared that squabbling US politicians will not be able to agree on a debt ceiling deal in time to avoid a default.
Singapore wealth fund GIC said longer-term concerns over fiscal strains in the US and Europe were prompting it to shift more money into emerging markets such as China, Taiwan, South Korea and India. The Singapore dollar hit a fresh record high as investors increased their bets that the Monetary Authority of Singapore (MAS) will accommodate a stronger currency to curb inflation.
The Singapore dollar nominal effective exchange rate has stayed persistently high at above 3.50 percent, above the middle of the assumed MAS band, but the authority's interventions to check its gains are deemed only attempts to smooth volatility. The ringgit bolted through technical resistance as investors continued to build up dollar-short positions and on lack of intervention by the central bank.
The Malaysian currency appreciated to as high as 2.9530 per dollar, according to dealers, breaking through resistance at 2.9600. The 14-day dollar/ringgit Relative Strength Index (RSI) fell more to 20.9, crossing the 30 threshold and indicating the pair is in oversold territory. The Philippine peso found strong support from leveraged funds and interbank speculators, though the central bank was spotted buying dollars to stem its strength. StanChart sees dollar/peso at 41.00 at end-2011 and euro/peso at 55.35.
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