The South Korean won led gains among emerging Asian currencies on Monday as hopes for progress in the US budget problems spurred investors to resume adding bullish bets in regional units after slides in the last week. Offshore funds and domestic exporters lifted the won by 0.5 percent against the dollar.
The South Korean currency also hit its strongest in more than 15 months versus the yen amid expectations that next month's election in Japan will result in victory for an opposition, the Liberal Democratic Party, that wants the central bank to aggressively ease monetary policy.
The Taiwan dollar gained on inflows from foreign financial institutions and demand from exporters. Interbank speculators increased long positions in the Malaysian ringgit and the Philippine peso rose on remittance inflows. "Optimistic news on the fiscal cliff could resume an appreciation trend in emerging Asian currencies," said Jeong My-young, research head of Samsung Futures in Seoul.
The won rose on demand from offshore leveraged funds and local exporters, dealers said. The South Korean currency hit 13.3260 per yen, its strongest since August 4, 2011. The won is likely to stay firm despite caution over dollar purchases by the foreign exchange authorities to stem its strength, they added. Barclays expected profit taking concern over potential intervention to weaken the won before a presidential election in December.
Barclays advised selling the won against the ringgit with a one-month target of 375.0. The ringgit eased 0.2 percent to 354.6.
"We think that Bank Negara Malaysia will allow a degree of MYR outperformance versus its trading partners' currencies after marked underperformance in Q3, particularly versus the KRW," it said in a note. The ringgit gained as interbank speculators cut dollar holdings, tracking a firm Singapore dollar. But some investors hesitated to add more bullish bets on the Malaysian currency, given uncertainty over the US fiscal cliff. The Taiwan dollar advanced on exporters' demand for settlements and inflows from foreign financial institutions.
The Philippine peso rose on remittance inflows and as interbank speculators resumed building bullish positions in the peso. Dollar-short covering last week gave investors with chances to buy the peso on dips, dealers said. The Philippine currency lost 0.7 percent against the dollar last week, according to Thomson Reuters data. Still, investors stayed wary of potential intervention by the central bank to keep the peso weaker than 41.20 to the dollar.