The South Korean won and the Thai baht fell for a second consecutive session on Wednesday as speculators unwound overstitched positions in emerging Asian currencies amid a wider global pullback in riskier assets. Emerging Asian currencies may see further corrections if investors cover additional dollar-short positions, but their longer-term bullish trend remains intact, analysts and dealers said.
Deutsche's internal gauge of market positioning that tracks moves among hedge funds had shown that long positions in some of the Asian currencies had been close to a record high as of last Thursday, Baig said. If the ringgit slides to close to 3.00 versus the greenback, that will give investors chances to buy the Malaysian currency, he said. The Singapore dollar and the ringgit fell to touch and break through support lines, respectively, but they recovered some losses.
The won fell as interbank speculators covered dollar short-positions before a local holiday on Thursday and tried to fill a gap which the South Korean currency saw last month. The peso had weakened past major support of 43.000 per dollar, which the central bank had allowed the market to break through, as investors covered dollar-short positions and dollar demand linked to sell-off in the peso bonds. The Philippine currency had been expected to weaken to 43.150, the 38.2 percent retracement level of its March-May strengthening trend, as it slid to 43.075.
But it recovered to stay stronger than 43.00 amid talk of agents' selling of dollars around 43.100. The ringgit slid on supplies from leveraged names and interbank speculators to cover dollar-short positions before the central bank's rate decision on Thursday.
The baht broke through 30.00 per dollar, which the central bank had allowed to be broken, and weakened past a strengthening trend line of January-May. Fast money and foreign banks sold the Thai currencies, dealers said. The baht has room to weaken probably to 30.14, the higher downtrend channel line of dollar/baht during January-May.