Asian currencies were steady on Thursday as investors held back because of uncertainty over the outlook for the US economy and rate decisions due in Europe later in the day. Traders said the market was also cautious because central banks in the Philippines, Malaysia, India and Singapore were suspected of having intervened this week to curb strength in their currencies.
The US dollar recovered against the yen and other major currencies overnight and held near a nine-month high against sterling in Asia. But Asian stock markets, where foreigners have been heavy net sellers this year, barely moved, giving little direction to currencies. The South Korean won initially rose 0.3 percent to hit 934.0 per dollar as local equities rallied, but it soon pared the gains to trade around 937.
A trader in Seoul said the won was stuck between 933 and 945 per dollar. "There's a solid bottom for the dollar at 930 because oil companies are buying more dollars and equity outflows are continuing," the trader said. "But there's also interest from shipping companies to hedge their earnings above 940 and exporters are selling options," she said.
Another trader felt the won would weaken to around 970 per dollar over the next few weeks, owing to outflows for dividend payments and SK Telecom's purchase of a stake in Korean broadband provider hanarotelecom, valued at nearly $1.2 billion. SK is buying the stake from a consortium led by American International Group and private equity fund Newbridge Capital.
Options traders said there was demand to sell won around 940 for one month and up to 1,000 per dollar through one-year options. Elsewhere, the Singapore dollar was steady around 1.4310 per US dollar while the Philippine peso fell half a percent from its previous close, backing off the highest level in nearly eight years hit on Wednesday.
In a volatile session, the peso rose from a low of 40.78 per dollar to hover around 40.60 before slipping again in late trading as the dollar gained against sterling and the yen. They said a report earlier on Thursday showing Philippine exports in November fell 2 percent from a year earlier raised worries the currency's 20 percent appreciation in the past 12 months may be hurting the economy.
Many investors kept to the sidelines ahead of meetings by the European Central Bank (ECB) and Bank of England (BoE), and a speech by Federal Reserve Chairman Ben Bernanke later on Thursday. Analysts expect the ECB to hold interest rates steady at 4.0 percent but see the BoE cutting rates due to weak consumption, which has sparked fears of a slowdown in the economy.
The next Fed rates decision is due on January 30 and market expectations are shifting increasingly towards a cut in the Fed funds rate of as much as 50 basis points, although the majority in a Reuters poll still expected a more modest 25 basis points.