Most emerging Asian currencies rose on Monday as hopes emerged for a deal to avert a debt default by Greece after Athens made new proposals to foreign creditors before the emergency euro zone summit later in the day. South Korea's won hit a near one-month high on exporters' demand for month-end settlements. The Taiwan dollar touched a three-week high as local stocks outperformed regional peers, and on inflows from foreign financial institutions.
The dollar eased against a basket of six major currencies with the euro up after Greek government said it had a new plan to secure financial aid and prevent a debt default. Still, investors remained cautious about Greece's proposals because it was not immediately clear how far Greece had yielded to creditors' demands for additional spending cuts and tax hikes, nor whether creditors could accept the offer. "Asia has been essentially subject to a risk-off trading dynamics on the back of rising European yields as well as the concern over Greece," said Sacha Tihanyi, senior currency strategist for Scotiabank, said in a research note.
"A Greek-relief result at today's European summit should mean USD/Asia lower and a better bid for regional fixed income." A failure could dampen risk sentiment and extend underperformance in Asia's risk assets, Tihanyi said. The won gained 0.9 percent to 1,097.5 per dollar, its strongest since May 26. Caution grew over possible intervention by the South Korea's foreign exchange authorities to stem the won's strength as it flirted around chart resistance levels.
The South Korean unit has a 120-day moving average at 1,098.1. The currency has been closing daily sessions weaker than the average since May 26. It also has the 50.0 percent Fibonacci retracement of its depreciation from April to June at 1,095.5. The Taiwan dollar advanced 1.1 percent to 30.728 per dollar, its strongest since June 1. The local stocks jumped 1.3 percent, well outpacing a 0.8 percent gain in a broad index of Asia-Pacific shares outside Japan.
The island's currency may strengthen further if the won extends its appreciation, traders said. Taiwan's central bank closely monitors movements in the won for its currency policy because the island competes against South Korea in overseas markets for some key products such as semiconductors. The Taiwan dollar pared some of earlier daily gains on importers' demand of the US dollar for payments. The ringgit rose as Malaysian government bond prices rose. The 10-year yield fell to 4.015 percent, while the 3-year yield slid to 3.215 percent, its lowest since January 2014.
Still, interbank speculators sold the ringgit around the session's high of 3.7200 per dollar on concerns over possible cuts in sovereign rating, the debt issues of state-fund 1MDB and a slowing economy. "Going forward, the MYR may weaken further due to the increasing risk of sovereign rating downgrade and liquidation of local government debt by foreign investors," said Heng Koon How, Credit Suisse Private Bank's senior currency strategist, in a client note. The bank adjusted its three-month forecast for the ringgit to 3.8000 and 12-month forecast to 3.9500, he said.
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