Comments by Federal Reserve chairman Ben Bernanke helped lift most emerging Asian currencies on Wednesday, but gains were kept small by the lack of specifics on how the US might ease monetary policy. The South Korean won, on a roller-coaster day that included a brief drop caused by North Korea, rose but failed to clear a resistance level.
The currency started firmer in local trade but turned weaker to 1,145.2 per dollar as interbank players reduced positions after Pyongyang's state news agency said the North was about to issue "an important report" - the same wording it used before announcing in December that leader Kim Jong-il had died.
Wednesday's announcement was that current leader Kim Jong-un had taken the country's top military rank. After news of that spread, the won rebounded to 1,137.9. Offshore funds including real money investors bought the currency and interbank names joined them on expectations of won demand related to Hyundai Heavy Industries' $614 million block sale of a Hyundai Motor stake to foreign investors.
"Many investors missed a pop-up in dollar/won during the past few days. So any bounce to 1,145 is a good opportunity to sell," said a senior Malaysian bank dealer in Kuala Lumpur.
The won ended local trade up 0.1 percent at 1,142.6, but currency players unwound bets on the local unit with a technical resistance line at 1,138.0, the 76.4 percent retracement of its depreciation during early July.
Early on Wednesday, most other emerging Asian currencies strengthened on Bernanke's remarks. But regional stocks fell on the Fed chairman's generally gloomy view of the US economy, Asia's main export market, and that led currencies to give up some of their initial gains.
Analysts said his comments suggested the central bank could opt for further monetary stimulus, which would support emerging Asian currencies. "A door to QE or Operation Twist remains open," said BNP Paribas currency strategist Thio Chin Loo in Singapore, referring to quantitative easing and the Fed's efforts to keep long-term rates low.
The Philippine peso firmed as much as 0.4 percent to 41.57 against the dollar, but gave up some of that gain as speculators took profits before Bernanke's second day of testimony.
The Philippine central bank's chief said strong capital flows were a near-term concern, although it has sufficient tools to manage the impact of fund movements. The comments caused speculators to reduce positions in the peso.
But a European bank dealer in Manila said he has not yet seen dollar-buying intervention by the central bank.
Early in the day, the Singapore dollar rose against the US dollar, due to demand from leveraged funds and short-term investors. But much of the gain was erased as investors including leveraged names unwound bets on weaker stocks.
The ringgit strengthened as interbank players chased it following the Singapore dollar's initial advance. But short-term investors took profits, forcing the Malaysian currency to give up some gains.