Leveraged funds bought emerging Asian currencies on Thursday, sending the Singapore dollar to a fresh record high and the South Korean won to a near three-year peak, as Moody's warning of a possible US downgrade and the Fed's comments on further stimulus prompted investors to seek higher-yielding currencies. On Wednesday, Federal Reserve Chairman Ben Bernanke said the US central bank was ready to ease monetary policy further if economic growth and inflation slow much more.
That contrasts to Asian central banks, which are still fighting inflation despite signs of a slowing global economy and the eurozone's debt crisis. The greenback broadly lost ground as Moody's Investors Service warned of possible downgrade in the US credit rating if lawmakers fail to increase the country's legal borrowing limit and the government misses debt payments.
Earlier Singapore's central bank was spotted buying US dollar, dealers said. The Singapore dollar hit a record high of 1.2155 per US dollar on inflows. Singapore's economy shrank more than expected in the second quarter, raised questions about whether authorities would continue to allow the local dollar to appreciate at its current pace, but the data did not put much pressure on the city-state's currency.
The won touched a near three-year peak against the dollar on exporters' demand for settlements and bond inflows. The South Korean currency gave up some gains as importers bought dollars on growing caution over possible dollar-buying intervention by the foreign exchange authorities. Some covered dollar-short positions as the euro slid below $1.42.
Earlier the local unit found support from dollar/won supplies to break 1,155, but the offers were not that strong, dealers said. The ringgit rose 0.5 percent, but investors covered dollar-short positions as they are wary of the central bank's intervention, especially if the Malaysian currency strengthens past 3.00 per dollar.