Most emerging Asian currencies rose on short-covering on Monday as signs of progress in efforts to tackle Europe's debt crisis and data about China from a private survey boosted risk assets. Before Sunday's European Union summit, some investors cut their bets on emerging Asian currencies by building dollar-long short positions.
Dealers and analysts said most short-term players on Monday neutralised those positions while a few dealers said some local speculators were seen adding exposures in the regional units. At the weekend's summit, European leaders neared an agreement on bank recapitalisation and on how to use the rescue fund to prevent bond market contagion, although difference remain over the size of losses private holders of Greek government debts will have to accept. Final decisions were deferred until another summit on Wednesday.
The progress lifted riskier assets including Asian stocks and other emerging currencies such as Latin American units. The euro recovered to the $1.39 level on stop-loss orders. "Most would rather build positions for a better-than-expected EU summit this Wednesday," said a European bank dealer in Singapore.
"I would probably sell small amounts of dollar/Asia and bigger bets before the November G20 meeting," the dealer added, referring to a summit among the Group of 20 leading economies on November 3-4 in Cannes. Also boosting risk assets was HSBC data showing that China's manufacturing sector picked up moderately in October, easing worries about a slackening global economy. The concerns over the euro zone and the global economy had forced some of emerging Asian currencies to give up this year's gains.
Many investors remained cautious over making big bets before Wednesday's euro zone summit. Analysts also advised against taking aggressive positions, given uncertainty about what the Wednesday session will produce. "Risk reward is not so good, still. The real movers will come after Wednesday," said another European bank dealer in Singapore, adding that was only looking for range trades.
Dollar/won fell as offshore funds and onshore speculators cut long positions while exporters such as shipbuilders also unloaded them. Players had carried over long positions that they built up on Friday when a major US hedge fund covered short positions, dealers said.
"The fund appeared to turn to long (on Friday) and may have to sell again, although it would not come around these levels. So, I think we may see more falls," said a senior foreign bank dealer in Seoul. Dollar/won has a 100-week moving average at 1,132.8. Stock inflows pushed down US dollar/Taiwan dollar inflows while the Taiwanese central bank was spotted buying and selling the pair, dealers said.
US dollar/Taiwan dollar positions were seen as neutral and investors stayed reluctant to make big bets before Wednesday. That may prompt importers to look for a chance to buy the pair on dips, some dealers said. "At 30.0, we will see more buying interest form importers," one trader in Taipei said.
Dollar/peso broke through a 200-day moving average on inflows over the weekend and a general weakness in the dollar. If the pair ends the day below the average of 43.281, it may head to 43.06, a level near the 50 percent retracement of its rise between August and October. The next support is seen at 42.98 where dollar/peso has a 55-day moving average and a 100-day moving average. Dollar/ringgit shed 0.6 percent as local and foreign names sold the pair in thin trading.
"I would stay neutral with a lot of skepticism about Europe. People will short the euro above 1.39 and they will long dollar/ringgit around 3.10-3.11," said a Kuala Lumpur-based dealer. Dollar/rupiah rose, in contrast to falls against other pairs in Asia, on end-month corporate demand. But the central bank was spotted selling the pair from 8,875, dealers said. It was seen at 8,900 last.
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