Most emerging Asian currencies eased against the dollar on Thursday as investors took profits on worries about the US "fiscal cliff" and potential intervention by regional authorities, but some investors bought them on dips, helping pare earlier losses. The Philippine peso fell as investors covered short positions in the greenback amid global risk aversion, while the South Korean won eased on offshore funds' selling.
Still, some market players including currency investors and corporates were ready to add to their optimistic positions in regional units. "Today's weakness is a chance to buy Asian FX on dips, thanks to Chinese growth bottoming and easy monetary policy from the G3," said BNP Paribas currency strategist Thio Chin Loo in Singapore, referring to central banks of the United States, Japan and Europe. The head of Japan's main opposition party, the front runner in next month's election, called for bold monetary easing by the Bank of Japan, helping emerging Asian currencies rise against the yen.
The won rose 0.9 percent to 13.4144 against the yen, its strongest since March 21. The Singapore dollar also gained 0.9 percent against the Japanese currency to 1.5107, the firmest since April 2. Regional units are likely to keep finding support from real money flows, said a senior US bank dealer in Singapore. BNP's Thio said she was not that pessimistic on the US fiscal issues.
"The tax cuts will be extended and debt ceiling will be lifted by the end of January," said Thio, adding that the won, the Singapore dollar and the Taiwan dollar were her top picks among emerging Asian currencies. The Philippine peso slipped as leveraged accounts and interbank speculators covered dollar-short positions. But some dealers looked to buy it on dips, saying the local currency would find support from remittance inflows and exporters.
A European bank dealer in Manila said he would add bullish bets on the peso when it is weaker than 41.20 per dollar and take profits around 41.00. The central bank is unlikely to allow the peso to strengthen past that level, he added. The Singapore dollar edged lower, but its downside was limited as real money funds' demand offset worries about the US fiscal cliff. The local unit found support from proxy trades for the Chinese yuan and flows for a safe haven with the city-state's triple-A ratings. Still, investors were wary of potential intervention by the central bank to prevent it from strengthening past 1.2200 to the US dollar.