SINGAPORE: The South Korean won and the Taiwan dollar firmed on Tuesday, leading gains in most emerging Asian currencies as investors hoped for more inflows to the region, but the mood remained cautious as the euro zone's debt crisis showed few signs of easing.
The Taiwan dollar rose on foreign funds inflows to the island's stocks and bonds, while the won found support from bids from offshore funds.
Despite worries about the euro zone crisis, some real money funds have been seen buying emerging Asian currencies as they make fresh allocations for the new year, given the region's healthier economic and fiscal fundamentals.
"There should be new money inflows into Asia, although those flows are still light. The question is how large they will be as things can change very quickly," said a senior trader at an Asian bank in Kuala Lumpur.
The dealer said he would maintain long positions in emerging Asian currencies against the dollar, while closely watching moves in the euro and the Australian dollar.
Still, many analysts and dealers expects investors to stay away from riskier assets, including emerging Asian currencies, given worries about the euro zone and slowing global growth.
BNP Paribas' currency strategist Thio Chin Loo in Singapore said she doubts if emerging Asian currencies could continue to benefit from such inflows.
Earlier, data showed China's exports and imports grew at their slowest pace in more than two years last month, indicating the global economy remains sluggish.
"MSCI AxJ is still below where it was at the beginning of last September when large outflows occurred," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore, referring to MSCI's broadest index of Asia Pacific shares outside Japan.
The index rose 1.7 percent on Tuesday, but is still down nearly 10 percent from the high of September 2011.
"The same conditions that preluded the sharp outflows (in late 2011) still prevail, suggesting a definitive return of capital flows back to the region is not yet warranted, in our view," Ji said, adding he would recommend selling emerging Asian currencies versus the dollar on rallies.
WON
Dollar/won fell on offshore fund sales, spurring onshore interbank speculators to cut long positions and enter fresh shorts, dealers said.
Exporters also sold the pair for settlements, while importers limited its slide.
Some traders looked to purchase the pair on dips, saying a few offshore funds were also buying around 1,155, given persistent worries about the euro zone's debt crisis.
"I'd like to add long USD/KRW here as I don't expect the euro to rise more," said a foreign bank dealer in Seoul.
Euro/won slightly rose to around 1,478.
A South Korean bank dealer said he is reluctant to short the cross pair for now, given short-covering on Monday.
However, the market appears to be targeting 1,450 because of the euro's weakness globally, the dealer added.
Meanwhile, Barclays Capital recommended selling Australian dollar/won
The South Korean central bank is reluctant to see further weakness in the won, Barclays said, while it expects the Australia's central bank to easy policy more aggressively than the market anticipates.
Barclays also said the recent trend of rise in Australian dollar/won is seen experiencing correction near term. The cross pair has risen 6.2 percent since late November.
"We recommend being short AUD/KRW via the 1m forward" it said in a note, with an entry level at 1,181 and a target of 1,090.
TAIWAN DOLLAR
US dollar/Taiwan dollar slid on inflows for Taiwanese stocks and bonds, while the central bank has been spotted buying the pair with oil companies joining the bids, dealers said.
Taiwanese insurers also sell US dollar/Taiwan dollar's non-deliverable forwards (NDFs) in offshore market to prepare for further falls in spot, they added.
The central bank bought an estimated $2 million in spot at every level with more agent banks seen buying the pair at the current level, a trader in Taipei said.
PHILIPPINE PESO
Dollar/Philippine peso fell as interbank speculators added short positions.
The pair had initially found support around 44.00 after data showing the country's exports in November slid for seventh month in a row.
But it broke the support on a higher euro and firmer regional stocks.
Some traders said the dollar/peso market positions were seen slightly short and looked to buy the pair on dips.
A European bank dealer in Manila said: "At these levels, I would prefer to buy first."
RINGGIT, SINGAPORE DOLLAR
Dollar/ringgit and US dollar/Singapore dollar fell on stop-loss dollar sales and as interbank speculators built up short positions, dealers said.
Investors dumped dollar/ringgit and US dollar/Singapore dollar to cut losses when the first pair broke through 3.1450 and the second breached 1.2900, dealers said.
Comments
Comments are closed.