Most emerging Asian currencies rose on Tuesday, tracking the euro's rise following a German court decision that it will rule on euro zone's bailout funds this week as scheduled, despite a legal challenge by a lawmaker. The Singapore dollar hit a one-year high with the euro's rebound, and the Taiwan dollar was at its strongest in more than three months on buying by foreign banks, although the central bank was spotted slowing down its appreciation.
But analysts said the gains in emerging markets' currencies - which typically represent greater risk appetite - were limited because investors were waiting on the key German ruling as well as a policy meeting of the US Federal Reserve this week. "The euro is seen having entered in an overbought territory and we have major events. So, it is difficult to chase Asian FX here," said Jeong My-young, Samsung Futures' research head in Seoul.
The Singapore dollar strengthened to 1.2327 to the US dollar, its strongest since September 13, 2011. But investors hesitated to chase the local currency further on caution over possible intervention by the central bank. The Taiwan dollar touched 29.620 versus the greenback, its strongest since May 29, in the island's main currency market on demand from foreign banks amid expectations for the Fed's more stimulus this week. Some exporters also bought the Taiwan dollar for settlements.
But the currency traded slightly weaker on the smaller foreign exchange market than main market as dealers said the central bank may have intervened. The rare move bolstered caution over stronger intervention, dealers said. The central bank usually steps in the main currency market to keep the Taiwan dollar stable for exporters and discourage speculation, according to dealers in Taipei.
The Philippine peso barely changed as strong exports data offset caution over possible intervention by the central bank. The peso started the domestic trade at a session low of 41.670 per dollar as investors were wary of dollar purchases by the authority. The local unit recovered most of initial losses after the country's exports rose 7.8 percent in July from a year earlier, higher than a 4.3 percent growth in June, although electronics shipments dropped.
"I prefer to sell dollar on any rallies, given sound fundamentals," said a European bank dealer in Manila. But the Indonesian currency found some relief as foreign banks bought it before the finance ministry's bond auction later in the day. The government aims to raise 5 trillion Indonesian rupiah ($522.08 million).