The won held flat on Friday despite South Korea's repeated warnings against a sharp appreciation, and gained over the week along with most of its Asian peers on an improved outlook for the US and Chinese economies, as well as hopes of a Greece aid deal. Emerging Asian currencies edged up for the day in subdued trading due to a public holiday in Japan and US trading curtailed by the long Thanksgiving weekend.
The won came under pressure as South Korea's Vice Finance Minister Shin Je-yoon said the won's recent appreciation was excessive and partly driven by speculative forces. He did not discuss any specifics about policy responses, however. The comment came a day after Deputy Finance Minister Choi Jong-ku said the government was ready to take action to control capital inflows and actual dollar-buying intervention. But the South Korean currency recovered most of its initial losses on exporters' month-end bids. The Taiwan dollar also gained on similar corporate demand.
Emerging Asian currencies are likely to stay firm next week as manufacturing activity in the Unites States and China raised hopes that the global growth outlook was improving at last, although regional intervention and uncertainty over the US budget could put a brake on gains, dealers and analysts said. Investors also pinned their hopes on the prospect that international lenders would agree on aid for debt-ridden Greece next Monday when euro zone finance ministers meet.
"Asia currencies may mildly strengthen next week, especially if the Greece issue gets resolved, although their gains may be capped by the US fiscal cliff and intervention concerns," said Maybank FX research head Saktiandi Supaat, referring to the $600 billion in tax increases and spending cuts. Emerging Asian currencies have already risen so far this week, led by the Philippine peso.
The peso has gained 0.7 percent against the dollar, according to Thomson Reuters data, as investors resumed buying it after profit-taking the previous week. Remittance inflows from overseas workers also supported the peso. The won also advanced 0.6 percent to the greenback on demand from offshore funds and exporters. Bullish bets on the South Korean unit increased to a two-year high during the last two weeks, a Reuters poll showed late on Thursday.
The Taiwan dollar has risen 0.5 percent with the Malaysian ringgit up 0.4 percent, according to the data. The Singapore dollar has strengthened 0.2 percent. Still, some analysts and dealers saw risks of corrections, saying positive factors have been reflected in regional currencies to some degree. "Fiscal cliff negotiations can still derail equity market sentiment. Asia has a lot of good news priced in and I see downside risks," said Jonathan Cavenagh, a senior FX strategist at Westpac in Singapore.
The won was steady as exporters' demand for month-end settlements offset caution over further intervention by the foreign exchange authorities. The South Korean currency earlier weakened to 1,087.0 per dollar on the comment from Vice Finance Minister Shin. The Taiwan dollar advanced on exporters' demands, while some foreign financial institutions bought the US currency, limiting gains in the island's unit. In Taiwan, foreign financial institutions are required to buy domestic stocks or bonds within a week after purchasing the Taiwan dollar.