SINGAPORE: The South Korean won and the Malaysian ringgit led slides among emerging Asian currencies on Thursday that stemmed from worries about the delay in nailing terms of a Greek rescue fund.
Several EU sources said on Wednesday the euro zone is examining ways of holding back parts or even all of the bailout programme until after elections expected in Greece in April while still ensuring it avoids a disorderly default.
That underscored how far Europe is from resolving a debt crisis which could threaten the stability of the global financial system, hitting riskier assets such as Asian stocks and the euro.
"A delay in the approval for a Greek bailout will lead to risk-off for a while. The switch to the dollar will be enhanced," said Saktiandi Supaat, head of FX Research at Maybank in Singapore.
Investors should buy the greenback against emerging Asian currencies, especially the won, the ringgit and the Singapore dollar, for short term, he added.
Bank of America Merrill Lynch said in a note that the Singapore dollar and the won are seen as vulnerable to investors' hedging their emerging Asia exposures.
On Wednesday, emerging Asian currencies rose after China's central bank chief said Beijing will continue to invest in the euro zone government debts.
But investors hesitated to add more bets on those currencies as positions in the regional units have been seen stretched.
Analysts also warned against pinning too much hope on China.
Chinese support is likely to come with some degree of conditionality, which may not be easy for Europeans to swallow, Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong, wrote in a note.
"Only Europe/Greece can save itself through clean implementation and execution of Greek austerity measures," he said.
Still, some investors were looking to buy emerging Asian currencies on dips.
"Do we really have a risk-off event? I don't think Greece will see a messy bankruptcy," said a European bank dealer.
"I still see chances to sell dollar/Asia on rallies with adding short-euro/Asia bets," he added.
Earlier this year, buying emerging Asian currencies against the euro had been a popular trade among investors, given Asia's stronger economic and fiscal fundamentals.
WON
Dollar/won rose on demand from offshore funds and some local interbank speculators covered short-positions which they had built on exporters' supplies.
The pair is seen rising more, probably to a 120-day moving average of 1,135.8.
Meanwhile, some foreign investors aggressively bought South Korean monetary stabilisation bonds (MSBs) this week without paying won cross-currency swap (CCS), indicating those investors may not target arbitrage trades, dealers said.
Those investors were not existing clients, prompting some speculation on inflows to the country from fresh real money funds or central banks elsewhere, they added.
On the over-the-counter-market, foreign investors on Wednesday bought more than a net 840 billion won ($748.98 million) worth of MSBs, which will mature in February 2014, according to sources.
Offshore names on Monday took more than 910 billion won in one-year MSBs out of a total 1.1 trillion won awarded.
"Usually the market sees massive CCS pay deals in six-month or 1-yr on such MSB purchases, but we have not seen massive CCS trades. It is impossible for foreign banks to carry outright positions of more than $800 million without CCS paying," said a trading head of a foreign bank dealer in Seoul.
"In many cases, a purpose of MSB investments is currency asset allocation, if it's not for arbitrage deal," he added.
Another local brokerage officer said: "MSBs are more attractive than T-bonds to investors who plan to hold until maturity."
RINGGIT
Leveraged accounts and interbank speculators bought dollar/ringgit, although selling interest above the 3.0600 level limited its gains.
If the pair ends the day above 3.0600, it may head to around 3.0730 where a 200-day moving average and the 38.2 percent Fibonacci retracement of its December-February slide sit.
SINGAPORE DOLLAR
US dollar/Singapore dollar briefly rose above 1.2693, the 38.2 percent retracement of its November-February decline.
The pair rose to as high as 1.2710 as some dealers said stops at 1.2700 were triggered.
If US dollar/Singapore dollar ends the day higher the 38.2 percent retracement, it may head to 1.2765-1.2780, a low on Dec 5 and the 50 percent retracement.
Comments
Comments are closed.