Emerging Asian currencies up

Emerging Asian currencies rose on Wednesday thanks to China's stronger-than-expected December trade data and persistent efforts to calm the yuan, even as traders and analysts expected the renminbi to weaken over the long term. China's yuan eased although the central bank kept its daily guidance rate steady again in a bid to stop the currency's slide.
"It is too early to expect yuan stability now. The stability we are seeing now is purely due to intervention. Depreciation pressure remains," said Nordea Markets' senior analyst Amy Yuan Zhuang in Singapore. The People's Bank of China used state banks to drive implied overnight yuan interest rates above 90 percent in Hong Kong on Tuesday, showing resolve to stop the yuan from tumbling, and making it prohibitively expensive to speculate against the yuan offshore.
"These measures, if continued, could be seen as a setback in financial liberalisation and not good in the long term," Zhuang said, referring to China's stabilisation steps. Once the renminbi resumes its depreciation, the South Korean won, the Singapore dollar and the Taiwan dollar will face large downside, while other emerging Asian currencies will probably muddle through, she added.
The won and the Malaysian ringgit advanced on Wednesday as investors covered short positions in the two worst-performing regional units so far this year on data showing China's exports and imports shrank much less than expected. Indonesia's rupiah gained on higher government bond prices amid expectations that the central bank may cut its policy interest rate on Thursday. The rupiah advanced on buying by foreign banks, with most Indonesian government bond prices, especially long-term debts, higher. Still, local banks sold the currency on expectations of a central bank rate cut.
Bank Indonesia is predicted to slash its benchmark borrowing cost by 25 basis points to 7.25 percent, a Reuters poll showed. A rate cut could spur a knee-jerk selling of Indonesian bonds and currency, traders and analysts said. Falling inflation and a shrinking current account deficit have recently helped foreign investors seek higher yields in the country. A Jakarta-based currency trader said the rupiah could weaken to 14,000 per dollar if the central bank slashes rates.
The won rose as traders cut bearish bets in the worst-performing Asian currency so far this year. Traders doubted the South Korean currency could extend gains, saying risk sentiment stayed fragile. "Offshore funds' dollar demand was still there. Without other bearish factors such as oil prices turning around, the won is unlikely to change its direction," said a foreign bank trader in Seoul. Oil fell briefly below the widely watched $30-per-barrel level on Tuesday for the first time in 12 years, although they rebounded on Wednesday in Asia.