Emerging Asian currencies rose on Friday, tracking earlier gains in the euro, but most regional units were set to see weekly slides as investors took profits on rallies amid caution over intervention and a slowing global economy. Month-end demand from exporters lifted the Taiwan dollar and the South Korean won, while the Malaysian ringgit advanced as investors added positions as the currency neared chart support. The Philippine peso rose on expectations of remittance inflows.
Asian stocks and commodities also gained, as investors continued to draw encouragement from central banks' stimulus measures. But the immediate upside for emerging Asian currencies looks limited given recent advances and caution about the potential for intervention, dealers and analysts said.
"We will need to see some more good news out of Europe to get more strength. Asian FX levels are looking rather strong for the growth momentum in a lot of Asia," said Sacha Tihanyi, senior currency strategist for Scotiabank in Hong Kong. Regional currency authorities are more likely to intervene to maintain export competitiveness, Tihanyi said, noting that manufacturing activity in the euro zone, China and the United States remains lacklustre. Some authorities, such as the central banks of Taiwan and the Philippines, have been spotted buying dollars recently, dealers said.
Negotiators discussing Greece's bailout came closer to an accord in late night talks on Thursday but are still short of a final deal that would unlock the next instalment of Greece's 31.5 billion-euro bailout package. Market players are also waiting to see if Spain will eventually apply for aid and trigger the European Central Bank's bond-buying programme.
Despite Friday's advances, most emerging Asian currencies were on course for a weekly slide, led by the ringgit which has lost 0.7 percent against the dollar, according to Thomson Reuters data. The Malaysian currency rose 2.5 percent last week, outperforming its Asian peers.
This week the Philippine peso has lost 0.7 percent against the greenback and the Indonesian rupiah has eased 0.6 percent. The Singapore dollar has dipped 0.3 percent and the Thai baht has lost 0.2 percent. For the month so far, most emerging Asian currencies have risen on easing steps from the Federal Reserve and the Bank of Japan, as well as measures by European policymakers to lower the borrowing costs of indebted euro zone members.
The Taiwan dollar gained in subdued trading on demand from exporters and some buying from foreign financial institutions. But investors hesitated to chase the unit further amid a lack of fresh incentives and as the central bank was spotted intervening to check the currency's strength, dealers said.
The Taiwan dollar is expected to trade mostly between 29.300 to the US dollar and 29.400 next week, they added. The won rose on month-end demand from South Korean exporters such as shipbuilders and it may continue to find such support next week, although dealers doubt the currency is going to gain much ground. The country's exports rose in annual terms over the first 20 days of September, the first climb in several months, suggesting export demand may be stabilising. Domestic importers looked for opportunities to buy the greenback on dips amid caution over possible intervention by the foreign exchange authorities to stem the won's strength, dealers said.
"I don't think exporters will actively seek the won when dollar/won is lower than 1,120," said a senior foreign bank dealer in Seoul. For the week, the won shed 0.2 percent against the dollar. The ringgit gained as traders covered short positions after it neared a technical support level of 3.0715 per dollar, the tenkan line on the daily Ichimoku chart - a support level that has held firm since early this month.
But the local unit's upside was limited on selling from leveraged funds. Domestic corporates showed some interest in buying dollars around 3.0550 to the greenback. The Philippine peso edged up as interbank speculators bought it on dips, expecting remittance inflows after the weekend. The peso, however, is unlikely to extend gains next week as investors may book more profits on the second best performing Asian currency this year, dealers said. "Any corrections in the dollar/peso are shallow. With the quarter-end approaching, we will see more profit-taking on the peso," said a European bank dealer in Manila.
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