The South Korean won and the Singapore dollar rose on Friday after US Treasury Secretary Timothy Geithner urged G20 members to avoid a currency war, but there was little reaction in other Asian currencies. Geithner said in letter to a G20 finance ministers' meeting in South Korea that the group's members should refrain from currency policies aimed at gaining a competitive edge.
A flurry of US proposals to correct global imbalances have so far run into stiff resistance at the meeting, and market watchers predict emerging market currencies could continue their climb against the dollar if the final G20 communique disappoints. The won shot up to 1,122.6 per dollar in afternoon trade after his remarks from 1,135.0 earlier.
The Singapore dollar firmed to 1.2974 per dollar from 1.3009 in the morning and 1.3020 late on Thursday.
The reaction in other Asian currencies was more modest. The dollar index against a basket of major currencies fell 0.15 percent, while Asian stocks outside Japan gained 0.3 percent. The South Korean won rallied after Geithner urged G20 countries not to weaken or prevent appreciation of undervalued currencies.
The remarks prompted investors to short the dollar. "Investors have been looking for reasons for short positions. The comments caused dollar-short plays and stop-loss dollar sales," a local bank dealer said. Foreign investors also supported the won by purchasing a net 384.1 billion won in local stocks.
The Malaysian ringgit trimmed its losses in the afternoon, when the spot rate was quoted at 3.1055 per dollar, against 3.1095 in the morning and 3.1045 late on Thursday. "If there is no solid discussion from the G20 meeting, I think the market will continue to sell the dollar next week," a dealer in Kuala Lumpur said.
The ringgit has appreciated 10.2 percent against the dollar this year. The Thai baht eased to around 29.88 per dollar in sluggish trade while the market watched for statements coming out of the G20 meeting. Dollar/baht was bid at 29.87 against 29.83 late on Thursday. The baht has gained 11.6 percent this year, making it the second-strongest Asian currency after the yen.