SINGAPORE: Most emerging Asian currencies advanced on Tuesday before a fresh injection of cheap money by the European Central Bank, although investors remained worried about oil prices.
The three-year, low interest loans are expected to maintain inflows to Asia and prompt more investors to search for carry trades funded with the euro, analysts and dealers said.
"Traders might look at selling euro/Asia cross again," said a European bank dealer in Manila.
Emerging Asian currencies have weakened against the euro since mid-January or early February as investors covered short-euro positions.
Selling euro against emerging Asian currencies were popular trade given stronger economic and fiscal fundamentals in Asian.
Still, investors feel ECB's long-term refinancing operation, or LTRO, has been priced into emerging Asian currencies, dealers and analysts said.
Some of the regional units are facing technical resistances and oil importers also took slides in dollar as chances to buy it on dips for settlements.
Banks are seen absorbing another half a trillion euros of cheap three-year loans from the ECB on Wednesday, a Reuters poll of money market traders showed, who said the opportunity would be the last of its kind.
"Ultimately the LTRO is a good thing. It may be more relief-inducing to see lesser demand as it would signal fewer concerns in the euro zone," said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong.
"Extremely strong demand may indicate still very present concerns which wouldn't give me confidence," said Tihanyi, adding investors should play consolidation range in emerging Asian currencies, rather than chasing them aggressively.
Reflecting the cautious optimism, investors were inclined to take profits from gains in emerging Asian currencies, which strengthened more with the euro extending gains.
Oil prices also remain a concern amid sustained tension over Iran's disputed nuclear programme, although Brent crude futures extended losses.
For the South Korean won and Indian rupee, oil importers capped gains.
Higher oil prices are feared to hurt global growth and exacerbate inflationary pressures in Asia, which have triggered shake-outs of long positions in emerging Asian currencies in the past years.
Worries about inflation continued to put pressure on the Indonesian rupiah.
RINGGIT
Dollar/ringgit extended slides as interbank speculators intensified selling on a higher euro.
But they were reluctant to boost it above a resistance at 2.9950 per dollar, dealers said.
"Interbank players are selling, but they are buying back 50 pips later. Investors don't have much interest in shorting dollar/Asia due to a lot of uncertainties," said a Kuala Lumpur-based dealer.
WON
Exporters and offshore funds sold dollar/won, prompting some local investors to clear long positions to stop losses.
Foreign investors absorbed a net 1.26 trillion won ($1.12 billion) worth of the three-year treasury bond futures, the most in a month and the fifth-largest in seven months, data from Korea Exchange showed.
Still, the pair finds strong support at 1,120 and traders are doubtful if it will be broken, given importers' demand and sustained worries about oil prices.
"I don't think it would fall more. Any slide from here would be a good chance to buy," said a foreign bank dealer in Seoul.
The ECB's fresh liquidity injection would be another chance to buy dollar, he added.
BAHT
Dollar/baht slid as offshore banks sold the pair, but local names bids limited its slide.
The pair has a firm support at 30.20, the 76.4 percent Fibonacci retracement of its July-Jan rises.
PHILIPPINE PESO
Dollar/Philippine peso fell on supplies from foreign names and real money accounts.
The selling intensified after on Monday short-squeeze failed to push it up above resistance at a 200-day moving average, dealers said.
RUPIAH
Dollar/rupiah stayed well supported by selling pressure in Indonesian bonds amid worries about oil prices and inflation.
The central bank was spotted selling the pair at lower levels to push down indicative prices, dealers said.
The pair is seen rising more without intervention by the central bank as the tense bond market may lead to further liquidation of bonds, dealers and analysts said.
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