Most emerging Asian currencies advanced on Tuesday before a fresh injection of cheap money by the European Central Bank, although investors remained worried about oil prices. The three-year, low interest loans are expected to maintain inflows to Asia and prompt more investors to search for carry trades funded with the euro, analysts and dealers said.
"Traders might look at selling euro/Asia cross again," said a European bank dealer in Manila. Emerging Asian currencies have weakened against the euro since mid-January or early February as investors covered short-euro positions. Selling euro against emerging Asian currencies were popular trade given stronger economic and fiscal fundamentals in Asian.
Still, investors feel ECB's long-term refinancing operation, or LTRO, has been priced into emerging Asian currencies, dealers and analysts said. "Ultimately the LTRO is a good thing. It may be more relief-inducing to see lesser demand as it would signal fewer concerns in the euro zone," said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong.
Dollar/ringgit extended slides as interbank speculators intensified selling on a higher euro. But they were reluctant to boost it above a resistance at 2.9950 per dollar, dealers said. Foreign investors absorbed a net 1.26 trillion won ($1.12 billion) worth of the three-year treasury bond futures, the most in a month and the fifth-largest in seven months, data from Korea Exchange showed.
Still, the pair finds strong support at 1,120 and traders are doubtful if it will be broken, given importers' demand and sustained worries about oil prices. "I don't think it would fall more. Any slide from here would be a good chance to buy," said a foreign bank dealer in Seoul.
Dollar/baht slid as offshore banks sold the pair, but local names bids limited its slide. The pair has a firm support at 30.20, the 76.4 percent Fibonacci retracement of its July-January rises. Dollar/Philippine peso fell on supplies from foreign names and real money accounts. The selling intensified after on Monday short-squeeze failed to push it up above resistance at a 200-day moving average, dealers said.
Dollar/rupiah stayed well supported by selling pressure in Indonesian bonds amid worries about oil prices and inflation. The pair is seen rising more without intervention by the central bank as the tense bond market may lead to further liquidation of bonds, dealers and analysts said.
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