The Malaysian ringgit and the Singapore dollar led declines in emerging Asian currencies on Monday on views that China may want a weaker yuan and as stronger-than-expected US job data dashed hopes for more easing by the Federal Reserve. China's central bank fixed the yuan's mid-point against the dollar sharply weaker, its second biggest single-day fall on record, in the latest sign Beijing intends to let the currency move in a wider range.
Regional units have been supported in recent years by expectations of slow but relatively steady yuan appreciation and a weakening currency may force China's export-reliant neighbours to prevent their currencies from appreciating further. "I won't be surprised if they widen the yuan trading band. It seems China would like to rely on FX policy to stimulate growth and that means a weak CNY," said Frances Cheung, senior strategist for Credit Agricole CIB in Hong Kong, adding a weaker yuan will put pressure on emerging Asian currencies. Interbank speculators covered short dollar/ringgit positions and dealers expect the pair to rise further, as market is still short on dollars. Fixing-related demand also supported.
The pair is seen heading to 3.0330-3.0350 with a down trendline between 3.0630 and 3.0400 which comes at 3.0340-3.0350. But a Kuala Lumpur-based dealer said the pair is unlikely to rise above the level as investors are looking to sell the pair on rallies. Dollar/won rose on demand from offshore funds and short-covering, although its upside was limited by exporters.
Some investors are hoping for more bond inflows from foreign central banks after market sources in Seoul said Swiss National Bank's officials would visit South Korea this month to check the country's debt markets. The Swiss central bank is scheduled to see institutions in South Korea in mid-March, the sources said. US dollar/Singapore dollar rose on short-covering and after China's weaker yuan mid-point fix.
The pair has room to rise further, probably to 1.2647-1.2654. The pair has the 76.4 percent Fibonacci retracement at 1.2647 of its February slides. The 1.2654 is the session high of March 6. US dollar/Philippine peso rose, but gave up some of its earlier gains on remittances and bond inflows. Some dealers also saw resistance at 42.75.