SINGAPORE: The Singapore dollar and the South Korean won weakened on Wednesday as investors cut holdings in emerging Asian currencies on concerns over the euro zone sovereign funding before key bond sales, although inflows supported a few regional units.
The Taiwan dollar and the Philippine peso bucked the overall slide, helped by stock inflows.
While inflows may be providing some relief to emerging Asian currencies early in the new year, it is premature to expect a surge of money into the region before investors see evidence that Europe's debt crisis is easing.
"Some funds are coming here as Asia's economy is better than others and some see the dollar as overbought. But most of the funds appeared to be short-term players," said Jeong My-young, a currency strategist at Samsung Futures in Seoul.
"Given the European problems, I don't think we will see massive inflows any time soon."
Some emerging Asian currencies such as the Indian rupee have risen against the dollar this year helped by inflows, while many others stayed under pressure from worries about Europe's debt woes.
The inflows helped the rupee, the worst performing Asian currency last year, fare better than its regional peers.
Investors are awaiting bond sales by Italy and Spain on Thursday and Friday, as the two big euro zone members are seen as most at risk from the debt crisis.
Asian shares gave up earlier gains amid caution over the auctions.
"Solid auctions will be a positive for risk sentiment, though I think it will be hard to see 'stunning' auction results for the time being," Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong, adding that a significant decline in Italian bond yields would be stunning.
"I'd remain more exposed to CNH, CNY and TWD rather than some of the more volatile high beta Asian currencies like KRW," he said.
SINGAPORE DOLLAR
Leveraged funds and U.K. accounts initially lifted US dollar/Singapore dollar.
US dollar/Singapore dollar later found more support as interbank speculators and macro names joined the bids.
WON
Dollar/won rose as offshore funds' bids spurred local interbank speculators to cover short positions.
But the pair failed to end local trade above the 1,160 level as South Korean exporters sold it on rallies for settlements and on offers from some offshore players.
"The 1,160 level will be capped as exporters are likely to unload USD above the line," says a senior foreign bank dealer in Seoul.
BAHT
Standard Chartered recommended buying dollar/baht as Thailand's trade balance may deteriorate in coming months and there could be a current account deficit in 2012, compared with 2011's surplus.
Weak global and local growth could impact capital inflows in the near term, with the MACD technical indicator giving a buy signal for the dollar, StanChart said.
"We forecast that USD-THB will reach 32.50 at end-Q1-2012; this is also our target for the trade," it said in a note.
A Bangkok-based dealer said he prefers buying it on dips with a target of 32.00, although the market seems to be long.
TAIWAN DOLLAR
Stock inflows and exporters' offers before the Chinese New Year pushed down US dollar/Taiwan dollar, while the island's central bank limited the pair's slide, dealers said.
Some importers joined the central bank's bids, they added.
On Tuesday, foreign investors bought a net 10 billion Taiwan dollar ($333 million) in stocks, the largest daily purchase since Dec. 1.
A central bank official said seasonal factors such as demand by exporters before the holidays help the Taiwan dollar appreciate.
PHILIPPINE PESO
Dollar/Philippine peso started local trade higher, but the pair turned lower on stock inflows.
The pair may slide further on such flows, but traders are reluctant to sell it more on persistent worries about the euro zone.
"I am looking to buy on dips at 43.85 and below with a stop loss at 43.70," said a European bank dealer in Manila.
Foreign investors have been net buyers of Manila stocks since Dec. 28 by the previous session, helping the main index hit a record high on Wednesday.
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