Asian currencies were mixed on Tuesday, with the South Korea won recouping much of the losses it suffered the previous day on news of North Korean leader Kim Jong-il's death, while the Indonesian rupiah fell. The won climbed 1.1 percent versus the dollar to 1,161.70, bouncing back following its 1.4 percent drop on Monday as Kim's death fanned worries about geopolitical risks.
The Singapore dollar and the Taiwan dollar eked out modest gains. But the Indonesian rupiah retreated nearly 1 percent, which traders credited to month-end corporate demand for dollars and dollar bids from foreign names. Market players have been reluctant to chase Asian currencies higher recently due to worries about the eurozone's debt crisis and the potential for fund repatriation out of Asia.
Risky assets and Asian currencies are unlikely to rally sharply in the near term given all the uncertainty, said a trader for a Japanese bank in Singapore. "I think everyone hates the uncertainty... It makes it hard to conduct medium- to long-term investments in a stable manner," the trader said.
Market liquidity was becoming thin ahead of the year-end, he said, adding that market players may be winding down their trading even earlier than usual this year. The South Korean won may underperform against other Asian currencies over the next couple of weeks given the uncertainty over the situation in North Korea, said Nick Verdi, Asian FX strategist for Barclays Capital in Singapore. On charts, the won's rise on Tuesday pushed dollar/won back below support in the 1,163 to 1,165 area. Such levels roughly correspond to a series of daily highs hit earlier this month as well as in late November and mid-October, and had previously been strong resistance for dollar/won.