Most emerging Asian currencies rose on Thursday with risk appetite cautiously increasing amid renewed hopes that the European Central Bank may adopt new remedies to tackle the euro zone debt crisis. The Taiwan dollar rose on foreign banks' short-covering from the previous close, which dealers said the central bank weakened through intervention. The South Korean won advanced on exporters' demand for settlements.
Interbank speculators added bullish bets on the Philippine peso and the Malaysian ringgit. "Asian FX will rise further if the ECB comes out with some clear bond buying plans and meets expectations," said Maybank's FX research head Saktiandi Supaat in Singapore, adding the won, the ringgit and the peso are expected to outperform.
Supaat said regional units have not enough priced the ECB's potential measures in yet with some squaring bullish bets on the currencies before the ECB's announcements. But emerging Asian currencies may have to jump the hurdles of a slowing global economy, especially China's sluggish economy, for further gains, dealers and analysts said. The Taiwan dollar gained as foreign banks covered short positions on expectations of the ECB's bond-buying programme and the Fed's stimulus.
But the trading was subdued on caution over intervention by the island's central bank to slow down the local unit's appreciation. The Taiwanese central bank usually intervenes at the last minute of local trade to reduce volatility, but it has been spotted weakening the Taiwan dollar "more than usual" at the last minute in recent days, dealers said.
The Taiwan dollar is seen staying firm until the Fed's policy meeting next week, but intervention is likely to cap its strength, dealers said. The won rose on exporters' demand for settlements, while some traders added bullish positions on hopes for the ECB measures.
Investors hesitated to build up aggressive bets before the bank's policy meeting later in the day. Some interbank speculators took profits. "It looks difficult to add the won holdings, given the euro's current levels, unless the ECB makes some surprising steps," said a senior foreign bank dealer in Seoul.
The Philippine peso slightly advanced, although traders took profits when it was stronger than 41.900 per dollar. A European bank dealer in Manila said the peso is expected to rise further, adding "positive new are hugging the headlines." "The ECB has nothing bad to say later. Disappointment can only come if they say nothing," said the dealer, expecting the peso to head to 41.70, its strongest on August 6, eventually. The ringgit edged higher as interbank speculators bought it on a higher euro, while some of them quickly booked profits. "The ringgit, like the Singapore dollar and the won, cannot appreciate much because China is slowing."