SINGAPORE: The Malaysian ringgit broke through a technical resistance and led gains among most emerging Asian currencies on Thursday as expectations for fresh Federal Reserve steps to help the US economy increased hopes for more inflows to Asia.
Fed Chairman Ben Bernanke said on Wednesday the US central bank was ready to offer additional stimulus after announcing that it would likely keep interest rates near zero until at least late 2014.
The comments caused short-term investors to chase emerging Asian currencies. Some dealers and analysts said that real money funds joined the bids.
The long-term players, such as pension and mutual funds, have been reluctant this year to add emerging Asian currencies for building up core positions due to worries about the euro zone's debt crisis. Still, some of them have bought the regional units for tactical bets, dealers and analysts have said.
Interest in the emerging Asian units brightened the currencies' outlook, although gains may be limited by possible intervention by central banks as some of the units are seen technically overbought, they said.
"Real money is buying into risk. I expect this to persist for a while longer and that will lead Asian FX stronger," said BNP Paribas' currency strategist Thio Chin Loo in Singapore.
She said the South Korean won, the Chinese yuan and the Indonesian rupiah are expected to benefit from the flows.
Westpac said the Fed's dovish stance is likely to keep capital flowing into Asia and keep regional equity markets well supported, adding its overall bias remains for further strength in Asian currencies.
"We are short USD/PHP and USD/IDR and while both have come down a fair way in recent weeks, the risk/reward remains for further gains in both currencies in the period ahead," the bank said in a note.
Many emerging Asian currencies have already benefited from an inflow of funds. The Indian rupee has risen about 6 percent against the dollar this year.
But some analysts and dealers see risks of correction as investors stay worried about European debt problems and slowing global growth. Asian countries are more likely to ease monetary policies, they added.
"We'll see an impetus towards carry trade type flows, however not as strong as would be the case if we had positive global growth momentum dynamics, which we are still a bit far off from," said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong.
"Euro zone issues are still an overarching concern and the bias for monetary policy in Asia remains to the loosening end of the argument as well. I'd look for risk aversion to be the main driver of a correction," he said.
Earlier, data showed South Korea's fourth quarter growth was the slowest since the 2008 financial crisis, backing the central bank and government into a policy corner as they try to shore up growth before national elections.
RINGGIT
Dollar/ringgit breached a technical support around 3.0400 on foreigners' interest in Malaysian bonds and as interbank speculators dumped the pair.
Model funds joined the selling and fixing-related offers also put pressure on the pair.
It slid to as low as 3.0355, the lowest since Sept. 13, but some speculators covered short positions, limiting its slide.
The pair's 14-day Relative Strength Index (RSI) fell to 19.47, well below the 30 threshold, indicating it is in an oversold territory.
"I won't add short (dollar/ringgit) positions here but will look to take profits (from the ringgit's gains) below 3.04. This move is too fast," said a Kuala Lumpur-based dealer.
But if the pair ends the day below 3.0400, it may head to 3.0000, he added. Dollar/ringgit has the 76.4 percent Fibonacci retracement at 2.9983 of its July-October rise.
SINGAPORE DOLLAR
US dollar/Singapore dollar tried to clear a Fibonacci support on continued selling by offshore funds and interbank speculators.
The pair came under more pressure after data showing Singapore's factory output in December grew more than expected.
US dollar/Singapore dollar had broken through the 76.4 percent retracement at 1.2566 of its October-November rise, but hovered around the level recovering some losses.
If the pair clears the retracement, it may head to a 200-day moving average, which stands at 1.2538.
A US bank dealer in Singapore said he has not seen or heard real money funds' selling of the pair yet, but it would be "probably a matter of time, given the dovish Fed's stance."
He would sell US dollar/Singapore dollar on any rallies, although its 14-day RSI falls to 26.73, indicating the pair is in an oversold territory.
WON
Dollar/won fell to the lowest in nearly two and a half months as foreign investors extended their buying spree on the Seoul stock market to the longest since early May 2011.
The pair slid to 1,120.3, the lowest since Nov. 14, but could not extend losses as importers bought it amid growing caution over possible dollar-buying intervention by South Korean foreign exchange authorities.
But dealers said the authorities were not spotted in the market.
"The authorities may not see the necessity of intervention for now, given sustained stock inflows. And offshore players don't appear to hold many short positions yet," said a foreign bank dealer in Seoul.
Foreign investors bought a net 448.2 billion Korean won ($398.1 million), posting their 11th consecutive day of net buying.
Still, investors were reluctant to sell dollar/won around 1,120 level on importers' demand and as the market is seen short dollar.
"We may see a correction tonight and I will square any short (dollar/won) positions by the end of the day," said another dealer, adding he would build up short euro/won positions.
BAHT
Stop-loss selling hit dollar/baht, while offshore funds bought the pair on dips, dealers said.
Thai importers' bids before the month-end also limited the pair's downside, they add.
"We have seen a lot of stop-loss this morning... But 31.50 should still be a good level to look at," said a Bangkok-based dealer.
The dealer said he would look to buy the pair on dips with a target of that level.
PHILIPPINE PESO
Dollar/Philippine peso fell, but investors were wary of possible dollar-buying intervention by the central bank.
Dealers said the central bank might step in the market at 42.80.
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