Most emerging Asian currencies rose on a rebound in the yen on Monday in thin trading, while Chinese banking sector reforms and a pledge by Group of 20 financial chiefs to spur growth provided further support to regional currencies. The Malaysian ringgit and the Singapore dollar gained on short-covering. The South Korean won advanced due to exporters' demand, while the Philippine peso rose on expectations of stock inflows and remittances.
The yen rose on stop-loss dollar selling. A weaker yen put pressure on other emerging Asian currencies earlier this year because it is seen as hurting the export competitiveness of rival countries such as South Korea. It prompted policymakers to worry about possible hot money inflows to other parts of Asia. The yen's rebound came as investors saw the victory of Japanese Prime Minister Shinzo Abe's ruling coalition in upper house elections as already priced in. The win is still expected to help Abe push massive reflationary policies.
China's central bank has removed controls on bank lending rates in a long-awaited move that could lower financial costs for companies, offering hopes that cheaper credit will help support the economy. "The weekend Chinese/Japanese news flow may also inject a positive impetus for the regional currencies given the implications of more supportive monetary conditions," OCBC Bank said in a client note.
The ringgit rose as investors cut dollar holdings on the firmer yen. Still, the Malaysian currency's gains were limited on concerns over capital outflows. The ringgit faces chart resistance at 3.1710 per dollar, its session highs of July 15 and 16, and at 3.1716, the 61.8 percent Fibonacci retracement of its fall in July. A senior trader at a Malaysian bank in Kuala Lumpur said the ringgit may head to 3.1500 once these resistance levels are cleared.
The Singapore dollar gained on the yen's rebound, although investors hesitated to push it above 1.2600 to the greenback. Intraday speculators and leveraged funds sold the city-state currency around that level as the 55-day moving average is at 1.2601, traders said. The Singapore dollar has been closing daily trading weaker than this average since early May.
The won advanced on exporters' demand for month-end settlements. But the South Korean currency's upside was limited as importers also bought dollars below 1,120, traders said. The peso rose on expectations of stock inflows and demand linked to incoming remittances, traders said.
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