SINGAPORE: Hopes for further inflows helped some emerging Asian currencies recover from initial losses on Wednesday that were rooted in concerns about a slowing global economy and high oil prices.
Sluggish global growth and the European debt crisis are likely to keep clouds over many regional currencies, given the high reliance of their economies on exports to the West.
Rising oil prices amid escalating Iran's nuclear dispute are also expected to exert pressure as most of the regional economies are net fuel importers. Asian importers bought dollars for settlements, dealers said.
Still, sustained inflows to Asia are seen offsetting such downward pressures, although higher oil prices may reduce incoming money, dealers and analysts said.
"Asia ex-Japan currencies are still receiving capital inflows and there is a lag between high oil and the growth impact," said Callum Henderson, global head of FX research with Standard Chartered Bank in Singapore.
"For now, risk appetite in general is still supported by huge liquidity injections from G4 central banks," he said.
The Bank of Japan's recent policy easing bolstered chances to use the yen as a funding currency to invest in the regional units.
As a result, some currencies have strengthened against the yen. On Thursday, the Thai baht rose to its highest versus the Japanese currency in six months. The baht was also supported by Japanese insurance payments for flood claims, dealers said.
Other emerging Asian currencies experienced some corrections against the yen, but many investors still maintained their bets, dealers said.
"We are getting close to levels where we need to be cautious. But I don't see big possibilities of huge short-yen covering yet," said a European bank dealer in Seoul.
But inflows to emerging Asia may slow down as rising oil prices will eventually accelerate inflation in the region, analysts said.
"If oil prices eventually pass through into goods and services costs, as well as business costs, there will be policy responses," said Saktiandi Supaat, head of FX Research at Maybank in Singapore.
WON
Dollar/won rose on demand from offshore funds and a weaker share market, but exporters prevented the pair from rising above 1,130, dealers said.
Foreign investors turned into net sellers in Seoul shares .
Meanwhile, yen/won edged up from a four-month low with a technical indicator showing the pair is excessively sold.
Its 14-day Relative Strength Index (RSI) has stayed below the 30 threshold.
But few investors were seen covering short positions as they saw more carry trades funded in the Japanese currency.
BAHT
Dollar/baht breached support at 30.47-30.53 and is seen heading to 30.20, the 76.4 percent Fibonacci retracement of its July-January rises.
Investors were keeping an eye on flows linked to Japanese insurance cover for the recent Thai floods.
On Wednesday, dollar/baht fell below a 200-day moving average on the flows linked to the insurance claims, dealers said.
A European bank dealer in Singapore said there was market talk of some 900 billion yen/baht flows from Japanese insurers earlier this week.
Yen/baht on Thursday hit its lowest level since August, while other yen/Asian currencies slightly rose.
RINGGIT
Maybank recommended selling New Zealand dollar/ringgit as the ringgit is seen rising further while the New Zealand dollar is being offered against most major currencies.
The bank advised selling the cross pair at 2.5200 for a target of 2.4820 with stop at 2.25525. It has a 200-day moving average around 2.4800.
The cross-pair dipped 0.1 percent to 2.5058.
Dollar/ringgit rose on a firm euro.
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