SINGAPORE: Most emerging Asian currencies fell on Monday as investors booked profits on recent gains and awaited a potential deal to prevent debt-ridden Greece from slipping into a chaotic default.
Athens is nearing a bond swap agreement with private creditors, while Prime Minister Lucas Papademos sought backing on Sunday from leading Greek political party leaders for painful and unpopular reforms.
The agreement is not expected be reached in time for a European Union summit later on Monday, when leaders will sign off on a permanent rescue fund for the euro zone and are set to agree on a balanced budget rule in national legislation.
Emerging Asian currencies have largely priced in the possibility of a Greek debt restructuring deal, though the removal of the imminent threat of default could further support investors' appetite for riskier assets, dealers and analysts said.
Recent inflows to Asia could also slow as investors await economic data later this week, including China's PMI and US payrolls data, to check the health of the global economy, they said.
"The risk/reward to be short USD/Asia at current levels is not as compelling to us in the way it was a few weeks ago, when we put on our short positions," said Jonathan Cavenagh, a foreign exchange strategist for Westpac in Singapore.
Cavenagh said he has turned neutral on emerging Asian currencies for the next few weeks from positive, adding that the bank had taken profits from the Philippine peso and the Indonesian rupiah.
"The decision to take profit reflects our view that while the broader backdrop for Asian currencies remains positive, we suspect further strong gains from here will be harder to come by," he said.
Most emerging Asian currencies extended recent gains last week, thanks to hopes for more inflows after the US Federal Reserve said it was ready to offer additional stimulus to boost economic growth.
But some currencies, such as the Singapore dollar, were seen as having run up too far, too fast.
"The recent price action (in emerging Asian currencies) has been a little one sided and certain overbought bells are starting to go off on a very short term horizon," said Emmanuel Ng, foreign exchange strategist at OCBC in Singapore.
"So markets may have to look for the next catalyst to confirm an extension of Asian FX strength or flip," Ng said.
SINGAPORE DOLLAR
US dollar/Singapore dollar gained on demand from leveraged names and interbank speculators.
Earlier, momentum funds sold the pair below the 1.2550 level, but the offers were absorbed with its 14-day Relative Strength Index (RSI) around the 30 threshold, indicating it stays near an oversold territory.
WON
Dollar/won rose on short-covering as investors are keeping an eye on possible demand linked to Hana Financial Group's acquisition of stake in Korean Exchange Bank from Lone Star for 3.9 trillion Korean won ($3.47 billion).
Local interbank speculators added long positions with caution over potential intervention by South Korean foreign exchange authorities to defend the 1,120 level.
But dealers said actual dollar bids related to the deal could fall far short of the total value of the deal as the US private equity firm has to pay back loans from Hana and tax to the government.
In addition, Lone Star will not likely hit the market for all their dollar needs, dealers added.
Meanwhile, foreign investors turned to net sellers in the Seoul stock market after a 12-session net buying streak.
RUPIAH
Dollar/rupiah rose on end-month demand from local corporate.
Market is also seen paring risk trades on the euro's correction.
TAIWAN DOLLAR
US dollar/Taiwan dollar slid on stock inflows and catch-up plays, while the central bank was spotted buying the pair to slow down its slide, dealers said.
The intervention caused some speculators to cover short positions.
Comments
Comments are closed.