Won, rupiah rise

Emerging Asian currencies bounced on Tuesday, led by the South Korean won and Indonesian rupiah on buying by US investment banks and offshore funds, though the rebound was fragile, with the rising trend in the US dollar still evident. On Tuesday, the single currency rose to above 1.35, helping emerging Asian currencies rebound, as investors covered short-positions after CNBC reported that European officials are mulling setting up a special purpose vehicle to buy distressed debt from banks.
Emerging Asian currencies have stayed under heavy pressure from dollar-demand in non-deliverable forwards (NDFs) from offshore institutional investors such as leveraged funds, which in the past few weeks have rushed to hedge against further weakness in the units.
Some funds were entering fresh long positions against emerging Asian currencies. Among 10 emerging currencies in the world, the Singapore dollar last week had the second highest weekly outflows, following the Mexico's peso, according to UBS. Earlier, rises in the won were limited by importers' dollar demand for settlements and stock outflows, but the local currency found further support from exporters and from a 5 percent jump in Korea's benchmark stock index on Tuesday.
The South Korean currency, which is still seen as oversold, may enjoy a further rebound on a recovery in risk sentiment. The 14-day dollar/won relative strength index (RSI) fell to 69.1, around the 70 threshold, indicating the pair is still near overbought territory.
At one point on Tuesday, the city-state's currency was expected to strengthen to around 1.2700 per US dollar where the 38.2 percent Fibonacci retracement level of its weakness since July stands.
The currency did appreciate, but only to 1.2868 to the greenback. The 14-day US dollar/Singapore dollar RSI was at 71.0, indicating the pair remains overbought. The baht strengthened past a resistance of 31.00 per dollar on foreign banks' demand. But dealers were reluctant to chase the Thai currency further around 30.90 level. Interbank speculators bought the ringgit on a rebound in the Singapore dollar. Demand intensified after the Malaysian currency strengthened past 3.1650.