The Singapore dollar broke through a short-term support line on profit-taking by investment banks amid intervention caution and negative rates on Thursday while investors reduced exposure in emerging Asian currencies as stocks weakened, indicating weak sentiment on the regional units.
"Markets are still dictated more by sentiment than fundamentals, which remains fragile, so (investors) still have to limit (emerging Asian currencies) positions," said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. The regional units, which have been boosted by stronger economic and fiscal fundamentals, lost some gains on persistent worries about a slackening global economy, given Asia's dependence on exports, and the euro zone's debt crisis.
The Singapore dollar briefly weakened past short-term support of 1.2090 per US dollar, the city-state currency's strongest point on August 11. Investment banks and US banks covered US dollar short positions. That has caused short squeezes by onshore interbank speculators, dealers said.
The short-covering came as MAS has showed firm determination to defend 1.2000 level and as Singapore dollar forwards are negative. Recently, swap offer rates (SOR) also went into negative territory. The won fell 0.3 percent as offshore investors sold the South Korean currency amid weaker stocks. The won has a resistance at 1,066.9, the 61.8 percent retracement of its depreciation earlier this month. The currency tried to break it three times, but ended session softer than that level.
Comments
Comments are closed.