Most emerging Asian currencies edged lower on Monday on worries over whether Greece could be forced to leave the euro zone, while Chinese trade data failed to ease concerns about growth in the world's No 2 economy. Regional currencies also came under pressure after Federal Reserve Chair Janet Yellen said on Friday that she expected the US central bank to raise interest rates at some point this year.
Malaysia's ringgit and South Korea's won eased as offshore funds sold those currencies. Euro zone leaders argued late into the night with near-bankrupt Greece at an emergency summit, demanding that Athens enact key reforms this week to restore trust before they will open talks on a financial rescue to keep it in the European currency area. "EUR/USD price action appears to put trust on a possible last-minute deal. But overall sentiment will remain fragile at least until the end of the week," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore, referring to the euro/dollar pair.
Ji said emerging Asian currencies were unlikely to rebound as China's June trade data indicated the economy was still slowing and ahead of Yellen's testimonies on monetary policy before lawmakers on Wednesday and Thursday. "At this point of time, we don't really envisage a quick drop in USD/Asia, especially with USD downside limited by Yellen rate outlook." China's exports unexpectedly rose in June but imports continued to slide, indicating that the authorities may need further policy support to lift the economy after a recent stock market rout.
The next focus is China's second-quarter economic growth data on Wednesday. Many economists expect annual growth to have dipped below 7 percent, the weakest performance since the global financial crisis. The won slid as offshore funds cut holdings after foreign investors were net sellers in the main stock exchange over the last six consecutive sessions. But the won pared most of its initial losses as foreign investors turned to net buyers of Seoul shares in the early afternoon. The Taiwan dollar rose on catch-up plays after the island's financial markets were closed due to a typhoon on Friday when most regional currencies gained on rebounds in China's stocks.
But traders said foreign financial institutions had been selling the currency, capping gains. Local shares rose in a technical bounce and cautious optimism after a five-session losing streak. Last week, foreign investors sold a combined net T$34.5 billion ($1.1 billion) worth of the island's stocks, according to the Taiwan Stock Exchange.