SINGAPORE: Most emerging Asian currencies fell on Monday as investors covered short positions in the dollar and the euro as the single unit was seen as over sold, and regional units are expected to remain weak as worries about Europe's debt crisis intensify once again.
Though the outlook appears grim, analysts said regional currencies may see some support as real money funds have been seen buying emerging currencies for fresh allocations for the new year, given the stronger economic and fiscal fundamentals of the region.
Other players such as hedge funds also bought regional units against the euro, dealers said.
"I suspect that the euro will remain on the weak side versus Asia as long as we don't see a massive explosion in risk aversion," said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong.
Tihanyi said Asian currencies' slide against the euro may provide chances to buy some regional units such as the Taiwan dollar versus the single currency.
Last week, emerging Asian currencies mixed against the dollar, although the euro hit a 16-month low versus the greenback.
The single currency fell further on Monday after a slew of bad news on the euro zone debt crisis over the weekend, although it trimmed some of earlier losses.
German magazine Der Spiegel reported on Saturday the International Monetary Fund was losing confidence in Greece's ability to clean up its public finances and work off its mountain of debt.
In addition, an adviser to Germany's finance minister Wolfgang Schaeuble told a Greek newspaper that a 50 percent write-down on Greek debt holdings, part of Greece's debt swap deal, was not enough to put the country's huge debt on a viable footing.
Investors are keeping an eye on debt sales from Spain and Italy later this week, seen as major test of investor willingness to plough more money into the region's troubled countries following recent steps to address their debt problems.
SINGAPORE DOLLAR
US dollar/Singapore dollar rose as hedge funds covered short positions, dealers said.
Euro/Singapore dollar rebounded from a 9-1/2-year low, but short-term shorts may find better levels to test support.
Its 14-day Relative Strength Index (RSI) on Friday fell to 19.04, a six-month low and well below the 30 threshold, indicating the pair was in an oversold territory.
The cross pair rose 0.4 percent to 1.6509 after falling to as low as 1.6399, the lowest since May 2002.
It may head to 1.6307, the 76.4 percent Fibonacci retracement of its rise between Oct 2000 and Dec 2004.
BNP Paribas' currency strategist Thio Chin Loo in Singapore said she expects the Singapore dollar to appreciate to 1.6000 against the euro.
BAHT
Dollar/baht rose on strong demand from offshore accounts, which was seen linked to dividend outflows.
Local and foreign banks in Bangkok also joined the bids on a higher US dollar/Singapore dollar.
RINGGIT
Interbank speculators covered short dollar/ringgit positions in thin trading on weakness in the euro and the Singapore dollar.
Some players were wary of possible dollar-selling intervention at 3.1700 by the central bank, but most dealers said they have not seen such offers yet.
"People don't want to be short with just interbank buying," said a Kuala Lumpur-based dollar.
WON
Offshore funds bought euro/won, but dollar/won's gains were limited by dollar sales by South Korean exporters, dealers say.
Expectations of further falls in euro/won are also keeping speculators from selling dollar/won, they add.
Euro/won rose 0.2 percent to 1,478.75, after sliding to as low as 1,469.02, briefly breaking through a trendline at 1,469.27.
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