Most emerging Asian currencies edged higher on Wednesday, supported by easing worries about Greece and the euro zone's debt crisis, with the South Korean won rising on position squaring. Gains in Asian currencies were relatively limited, however, with some traders saying they suspected that market players acting on behalf of central banks were buying dollars.
"It's very likely that agents are supporting the US dollar," said a trader for a European bank. Another trader said the dollar looked well bid against Asian currencies even as the greenback retreated versus the euro, adding that it seemed as if such agent banks were "slowing things down in all dollar/Asian pairs".
The euro hit a seven-week high of $1.3125 on Wednesday, boosted by European policymakers' efforts to tackle the debt problems of Greece and Spain. Greece announced this week better-than-expected terms for its debt buyback, fueling optimism it will continue to receive international aid to avoid a default. In addition to an easing of concerns over the euro zone's debt crisis, loose monetary policies in the United States and other developed countries are also seen as being positive for emerging Asian currencies.
Monetary easing in major economies could lead to sustained Asian currency strength, Sacha Tihanyi, senior currency strategist for Scotiabank in Hong Kong, said in a research note. Tihanyi, however, cited some caveats. "We remain bullish Asia, but acknowledge that current levels are looking very strong in the near term; further directional evolution will be dependent on the degree to which Asia resists appreciation," he said. The South Korean won pushed higher, getting an added lift as stop-loss dollar selling kicked in, traders said. There was some talk of dollar-buying intervention by local authorities at levels around 1,082, and that helped to limit the won's gains.
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