Most Asian currencies up

Most emerging Asian currencies rose on Tuesday after top Federal Reserve officials eased worries about an immediate cut in stimulus, although some gains were pared by concern that tight liquidity could cut China's economic growth rate. The Thai baht gained on demand from offshore funds amid expectations of inflows linked to stake sales of local financial companies to Japanese firms. The Malaysian ringgit and the Philippine peso rose on short-covering. The South Korean won advanced on exporters' demand for month-end settlements.
That came after two top Fed officials on Monday downplayed the notion there could be an imminent end to monetary stimulus. Still, investors were reluctant to add bullish bets in emerging Asian currencies, given concerns about Chinese banks' ability to access cash after a week-long squeeze in the country's money markets. The liquidity problems may slow the world's second-largest economy even further, traders and analysts said.
"The pressure in Chinese money markets will remain as capital outflow out of China picks up," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur. The baht advanced as demand from offshore funds prompted stop-loss dollar selling among local banks amid lower local bond yields, traders said.
Some offshore banks such as Japanese lenders joined the bids, they added. That came as investors are watching for baht demand linked to possible acquisitions of Thai businesses by Japanese companies. Meiji Yasuda Life Insurance Co has entered into exclusive talks to buy a 15 percent stake in Thai Life Insurance Co for around $700 million, people familiar with the matter told Reuters.
The peso gained on demand from local and foreign banks to trim bearish bets on the currency, traders said. "Actual tapering and an end of QE are still far away," said a senior Philippine bank trader in Manila, referring to the Fed's quantitative easing. The won rose on short-covering and exporters' demand for month-end settlements. Some offshore funds joined the purchases, traders said.
Earlier, Daewoo Shipbuilding & Marine Engineering Co Ltd said it has won a $565 million overseas order for a drillship, adding to expectations for more won demand. But traders sold the ringgit on rallies on worries about continuous capital outflows. Offshore funds and custodian banks did not buy the Malaysian currency, traders said. "We are still bullish on the dollar and the underlying trend is the same. It is better to buy the dollar until we get bad US data," said a senior Malaysian bank trader in Kuala Lumpur. Offshore funds and Malaysian importers looked to buy dollar on dips around 3.2000, he added.