The South Korean won and the Singapore dollar led Asian currencies higher on Tuesday as the US dollar weakened slightly, but gains were mostly limited as traders fretted over the greenback's outlook. "The market needs to know if this current dollar strength is purely position closing or.sustained," said a Kuala Lumpur-based trader.
"Markets (are) watching the dollar weighted index." The Singapore dollar gained 0.49 percent to 1.2971/USD at 0853 GMT on Tuesday on a weaker USD/EUR in afternoon trade. Analysts say the biggest surge in 7 years recorded in Singapore's October export data helped propped the Singapore currency against the US dollar on Tuesday.
The South Korean won turned higher against the dollar as the central bank raised interest rates and exporters chased it for settlements, prompting investors to clear dollar-long positions to stop losses. The Bank of Korea lifted the 7-day repurchase agreement rate to 2.50 percent as expected, for the second time since the global crisis ended and signalled further tightening as it shifted its focus away from heavy fund inflows to rising inflation.
The won also found support from a rebound in the euro but gave up some of its earlier gains as dealers spotted the foreign exchange authorities buying dollars to check its strength when it rose past 1,125 per dollar. The Indian rupee fell to an over seven-week low, reversing all its early gains, after the domestic stock market dipped. Persistent dollar buying by oil importers and risk averseness of foreign investors also weighed on the unit, dealers said. Foreign inflows are tapering off as offshore investors begin to wind up their investments to avoid piling up risks close to the year's end, dealers said. The dollar came off from early highs preventing a sharp slide in the rupee.