SINGAPORE: The Indian rupee and the South Korean won led gains in emerging Asian currencies on Tuesday, fueled by hopes for more stimulus for the US economy, but corporate demand for dollars heading into the end of the quarter limited their advance.
Federal Reserve Chairman Ben Bernanke said on Monday that a continuation of accommodative policy was needed to support the US economic expansion.
The comments kept market expectations for more easing alive and pressured the dollar, though he did not indicate that the Fed was eager to begin another round of bond purchases.
But investors hesitated to build up more bullish bets on emerging Asian currencies due to worries about a slowing Chinese economy.
"The likelihood of getting another QE is slim despite the dovish tone," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore, referring to the Fed's practice of printing money to buy assets, known as 'quantitative easing'.
"The near-term challenges to Asia ex-Japan currencies are two-fold. The cyclical development is likely to be weaker than stronger in the next three months. Capital flows to the region will remain subdued given the already low bond yields in the region, rising inflation expectation and recent stock market rallies," Ji said.
It would be better to sell emerging Asian currencies on rallies until major economies in the region such as China show stronger growth, he added.
Emerging Asian currencies have weakened so far this month on concerns over a severe slowdown in the world's second-largest economy, while a strong US economy has reduced hopes of more policy easing by the Fed.
Still, emerging Asian currencies have room to rise as long as the market continues to expect more easing by the Fed, some dealers and analysts said.
"We are in for some rebound after (the) correction so far in March," said Dariusz Kowalczyk, senior economist and strategist for Asia ex-Japan at Credit Agricole CIB in Hong Kong.
Kowalczyk said the market appears to be hoping for more measures from the Fed, although he does not think Bernanke said anything that justifies those expectations.
Emerging Asian currencies have to some degree reflected worries about the cooling Chinese economy, he added.
"They are partly priced in, and will come back after Q1 GDP is out on April 13, but this could be a good buying opportunity," Kowalczyk said.
A senior Malaysian bank dealer said he was looking to buy the regional units on dips.
"During the past weeks, all of us got chances to short dollar/Asia at good levels. We just need patience," the dealer said.
WON
Dollar/won extended slides on stop-loss dollar selling and exporters' month-end supplies. Some offshore players also sold the greenback, dealers said.
Earlier, the pair erased most of initial falls and had stayed above a 100-day moving average on demand from importers and as interbank speculators added long positions.
Expectations for dollar demand related to South Korean companies had provided support.
But speculators had to clear those long positions as foreign investors powered local stocks and exporters sold the pair. Investors were also wary of possible dollar-selling intervention by the foreign exchange authorities to limit its gains.
"Players gave up long positions. Dollar demand linked to dividend payments is seen offset by foreigners' stock purchases," said a senior foreign bank dealer in Seoul.
Foreign investors turned to net buyers of Seoul shares , adding a net 324.1 billion won ($283.92 million).
Dollar/rupee fell on firm Indian stocks, reflecting an improved risk appetite globally after the Bernanke's comments.
"The dollar has been sold across the board and sentiment is positive after comments from the US Fed," said a senior currency trader at a state-owned bank. He expects the unit to move in a wide band of 51.00 to 51.30 during the session.
But the pair is still seen on a rising trend with the third week of equity outflows and has support near 50.78, the 38.2 percent Fibonacci retracement of its December-February slides.
Bernanke's comments may boost commodity prices, supporting dollar/rupee, dealers said.
RINGGIT
Dollar/ringgit slid, but interbank speculators cover short positions as the euro and the Australian dollar fell.
"The market needs to be convinced that the euro will rise more," said a Malaysian bank dealer in Kuala Lumpur.
"If the euro tests 1.3400, we will break 3.0600," he added.
BAHT
Dollar/baht slid on firm stocks and tracked slides in other dollar/Asian currencies.
But month-end corporate dollar demand limited the pair's downside.
RUPIHA
Dollar/rupiah edged up on scarce dollar supply with month-end corporate bids adding to support.
Indonesian central bank was spotted selling the pair, but the amount was seen very small, dealers said.
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