SINGAPORE: Most emerging Asian currencies fell on Thursday as investors took profits from recent gains after the European Central Bank's fresh liquidity injections and as Federal Reserve Chairman Ben Bernanke failed to provide clear signs of more policy easing.
But the Singapore dollar bucked regional weakness, eking out a slight gain as investors bought the city-state's currency against a retreating euro.
Despite the overall weaker tone on the day, emerging Asian currencies are expected to remain relatively firm in at least the near-term as they are seen attractive for carry trades funded by the euro, dealers and analysts said.
Helping to curb losses in the region, China's factory activities grew more than expected in February with new exports orders for big companies bouncing back.
"We see the EUR as an attractive funding currency for investments in AXJ currencies," Standard Chartered said in a note.
StanChart said investors should shift funding of long emerging Asian currencies positions to the euro from the dollar, adding the euro would fall after the ECB's fresh injection of cheap liquidity.
Emerging Asian currencies had already rebounded versus the single currency on Wednesday when the ECB provided 530 billion euros to banks in a second offering of three-year funds.
Adding support to the dollar, Bernanke in remarks to Congress on Wednesday stopped short of signaling further Fed bond purchases, souring some hopes for more stimulus despite his tempered view of the US economic recovery.
The lack of any such signal on a third round of quantitative easing (QE3) may cause more severe corrections in emerging Asian currencies, some dealers said.
"Asian currencies, along with the euro and the Australian dollar, have risen after the QE3 talks. Without QE3, we must give up some of those gains," said a senior dealer at a Malaysian bank in Kuala Lumpur.
In February, most regional currencies enjoyed a second month of gains against the dollar thanks to inflows to Asia with policy easing by major central banks.
BAHT
Dollar/baht rose as demand from domestic banks and gold importers prompted a short squeeze.
Earlier, the pair's upside was capped by strong selling from offshore accounts and foreign banks in Bangkok.
RUPIAH
Dollar/rupiah rose as an unexpected slowdown in inflation failed to ease worry about price pressure in Indonesia.
The country's inflation is seen picking up again after planned fuel subsidy cuts, and that would continue to support the pair, dealers and analysts said.
But the central bank was spotted selling the pair to prevent it from crossing the 9,100 level, dealers said.
RINGGIT
Dollar/ringgit gained slightly on short-covering by interbank speculators, but they were reluctant to chase the pair higher on a view risk appetite may improve after a strong China PMI.
"The market is still short and I will buy on dips around 2.9930-50 with stop-loss at 2.9900," said a Kuala Lumpur-based dealer.
But he would not add dollar/ringgit holdings above 3.0000, saying "China PMI points to an improving global economy."
SINGAPORE DOLLAR
US dollar/Singapore dollar started higher but it turned lower pressured by selling euro/Singapore dollar.
Macro funds and interbank speculators sold US dollar/Singapore dollar, dealers said.
The pair was also under pressure from strong Chinese factory data.
PHILIPPINE PESO
Dollar/Philippine peso rose on a weaker euro in the afternoon, but investors hesitated to make big bets before the central bank's rate decision.
The Bangko Sentral ng Pilipinas (BSP) was expected to cut its key policy rate for the second time in a row by 25 basis points to 4.00, a Reuters poll showed.
Earlier, inflows to the country's stocks and bonds put pressure on dollar/Philippine peso.
Comments
Comments are closed.