SINGAPORE: Most emerging Asian currencies slid on Tuesday as short-term investors cut positions on higher US Treasury yields and importers bought dollars on firm oil prices.
The regional units started the day slightly higher, but tracked a softer Australian dollar which weakened after BHP Billiton said it expects China's iron ore demand growth to fall to single digits.
Asian stocks also fell, putting pressure on emerging Asian currencies.
"It is difficult to buy Asian currencies as the dollar is seen staying firm with higher US Treasury yields and it is a matter of time for the euro to fall again," said a senior dealer at a Malaysian bank in Kuala Lumpur.
"But I still believe Asian currencies will regain strength in the next few months and I am sitting out this period," the dealer added.
Longer-dated US bond yields on Monday touched a near five-month high. Investors are likely to keep cutting bond holdings on signs of a recovery in the US economy, which will support the dollar.
The strength in the dollar, along with China's move to widen the yuan's trading band, has capped appreciation in emerging Asian currencies.
But China's central bank on Tuesday fixed the yuan's mid-point at a stronger level against the dollar for a third consecutive session, undercutting views that Beijing may want to have a weaker yuan to boost growth.
In the belief the yuan would weaken, "some offshore players built up long dollar/Asia positions too much last week," said a foreign bank dealer in Seoul. "Ironically, Asian currencies could resist pressure from a firm dollar as those players need to clear the positions."
So, the regional currencies are expected to stay in the recent ranges for the time being, the dealer added.
Investors are keeping an eye on speeches of Federal Reserve Chairman Ben Bernanke later this week, but few expect him to provide fresh factors that would break the trading ranges of emerging Asian currencies.
SINGAPORE DOLLAR
Hedge funds and interbank speculators lifted US dollar/Singapore dollar on a weaker Australian dollar, dealers said.
But gains were capped by selling interest from model accounts, they added.
The pair has a resistance near 1.2617 where the bottom of the daily Ichimoku cloud sits.
WON
Dollar/won initially fell on South Korean exporters, but the pair turned higher on bids from importers and custodian banks.
Expected dollar demand linked to local companies' dividend payments to foreign shareholders also supported the pair. Many South Korean companies pay dividends in March and April.
A tobacco maker KT&G is scheduled to pay dividends on Friday with foreigners estimated to receive 264.1 billion won ($235.34 million), according to Reuters' calculations.
POSCO is set to pay dividends on March 27 and foreigners are estimated to take 316.5 billion won in dividends, the calculations showed.
Those dividend payments may support dollar/won, but they will not lift the pair as foreigners are unlikely to take all the proceeds back home, dealers said.
Meanwhile, yen/won rebounded to 13.4717 but the cross is seen eventually testing the 76.4 percent Fibonacci retracement near 13.39 of its rises April-October last year.
Its 200-week moving average around 13.31 is not far, either, and it is on the course for the biggest quarterly drop since the first quarter of 1998.
Real money investors have sold the cross pair recently, a foreign bank dealer in Seoul said.
RUPIAH
Dollar/rupiah rose 0.5 percent to 9,170 per dollar.
Lack of interest from interbank speculators and persistent intervention from the central bank kept dealers away from this pair but strong demand from locals could still push the pair up towards the 9200 handle again.
Continued rise in oil prices and higher dollar/Asian currencies fueled bidding in the offshore non-deliverable forwards (NDFs), with the one-month swap point widening.
PHILIPPINE PESO
Dollar/Philippine peso turned higher as bids from foreign names prompted interbank speculators to cover short positions.
The pair finds support at 42.80, near the bottom of daily Ichimoku cloud, dealers said.
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