Most emerging Asian currencies eased on Friday and gave up a some of their weekly gains after the European Central Bank provided no immediate remedies to the euro zone debt crisis, prompting investors to cut riskier positions. Interbank speculators unwound long positions in most regional units such as the South Korean won, the Malaysian ringgit and the Philippine peso they had placed on expectations of more actions by the ECB.
The ECB on Thursday indicated any intervention would not happen before September and would occur only if governments activated the euro zone's bail-out funds to join the central bank in buying bonds - disappointing investors who had hoped for immediate action.
Some investors did not dump emerging Asian currencies because they had already factored in some Draghi disappointment and were waiting for key US job data later in the day, seeking clues to whether and when the Federal Reserve may ease monetary policy further. Still, emerging Asian currency is unlikely to regain investor appetite much amid sustained worries about the euro zone and a slowing global economy, dealers and analysts said.
"Lack of any new pro-growth measure in the US and decisive enough pro-stability policies in the euro zone left investors worried that policy makers are not doing enough in the face of weakening data and rising market stress," said Dariusz Kowalczyk, senior economist and strategist for Credit Agricole CIB in Hong Kong.
Despite Friday's weakness in emerging Asian currencies, majority of regional units maintained weekly gains. The ringgit has been the best-performing unit among them so far this week with a 0.8 percent gain against the dollar. Currency investors increased long positions in the Malaysian currency ten-fold in the last two weeks, a Reuters poll showed, especially as many took profits from bullish positions in the Singapore dollar against the ringgit.
Last week, the city-state's unit hit a 14-year high versus it's neighbour's currency. Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur, said emerging Asian currencies have not fully priced in the disappointment from the ECB yet.
"It is clear that further retrace in euro/dollar will come forth and we see the Asian units weakening as well, but in a managed manner. The bias is intact for dollar strength in the near term," Ramanathan said. Norwegian and Chinese investors bought a combined net $1.73 billion worth of won bonds last month, data showed earlier, as South Korean debt grew more popular among investors looking for both safety and yields.
The ringgit slid as interbank speculators reduced bullish bets after the ECB fell short of market expectations. Some traders bought the Malaysian currency on dips, seeing technical support lines around 3.1450 per dollar and before the US payrolls data. The local unit, however, is seen weaker as investors are likely to shun riskier assets, dealers said.
The Philippine peso started local trade down 0.2 percent to 41.950 per dollar and weakened to 41.975. But the peso found relief from bids placed around 42.000, which were related to remittance inflows. Local banks also joined the bids, limiting the local unit's slide. The Thai baht slid on catch-up selling and weaker Bangkok stocks.