The South Korean won hit a 14-month high to the dollar on Tuesday supported by comments the country sees no need for fresh steps to curb inflows, leading gains among emerging Asian currencies hopeful about a compromise in the US budget crisis. South Korea's Vice Finance Minister Shin Je-yoon said the country does not believe current market conditions demand new regulations to reduce the risks from rapid foreign capital inflows.
The comment prompted offshore funds to chase the South Korean currency and stop-loss dollar selling. The won's appreciation drove other emerging Asian currencies such as the Taiwan dollar. Moody's Investors Service's cut to France's rating put pressure on the euro, leading to some regional currencies edging higher against the euro.
Asian foreign exchange authorities, including central banks of Singapore, the Philippines and Taiwan, have been spotted buying US dollars to stem appreciation in their currencies as the global economy has not secured strong growth momentum yet. Some short-term investors had bearish bets on emerging Asian currencies due to such intervention and with worries about the US budget deal and European debt issues.
The won hit 1,081.0 per dollar, its strongest since September 9, 2011 after the vice finance minister's remarks on inflows. Technically, the South Korean currency is seen heading to 1,078, around the bottom of the downtrend channel starting from late August and its weakest on September 9 last year.
The South Korean currency touched 13.2876 to the yen, its firmest since August 4 2011 as Shinzo Abe, the leader of Japan's opposition Liberal Democratic Party which has a commanding lead in opinion polls ahead of the election on December 16, urged the Bank of Japan to pursue "unlimited" easing. "I don't think the won will breach 1,180 easily as the authorities will keep intervening," said a senior foreign bank dealer in Seoul.
The Taiwan dollar tracked the won's strength and domestic exporters bought the island's unit for settlements. It also found support from some inflows from foreign financial institutions. But investors were wary of potential intervention by the central bank to prevent the Taiwan dollar from strengthening past 29.000 to the US currency.
The ringgit strengthened past 3.0572 per dollar, the 38.2 percent Fibonacci retracement of its weakness since October 18, on demand from interbank speculators in slow trading. The Malaysian currency also has a technical resistance at 3.0532, the kijun line on the daily Ichimoku chart. The ringgit has been staying weaker than the line since early November.
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