The won strengthened past technical resistance lines and is expected to outperform its Asian peers with widened non-deliverable forwards (NDFs) spreads, but it gave up some of its early rises.
"Those who put on long risk trades will not be adding, whereas those who missed out would rather wait for after the EU summit on Wednesday night," said a European bank dealer in Singapore.
The dealer would buy only "slow moving" Asian currencies such as the Taiwan dollar , which the island's central bank has been spotted buying and selling to reduce volatilities.
On Monday, short-term investors covered short positions in emerging Asian currencies built before Sunday's European summit as that region's policymakers made some progress toward tackling their sovereign debt problems.
Euro zone officials said France and Germany were close to agreement on how to use the European Financial Stabilisation Facility to stave off bond market contagion.
That supported stocks in Asia ex-Japan and other emerging currencies such as the Mexican peso.
"I don't expect something bad from the summit. But I need to see the result tomorrow before making next moves," said a senior Singapore bank dealer, adding he would not make any big bets ahead of the meeting.
Deep divisions over the extent of losses that private holders of Greek bonds would have to accept remain a huge risk and final decisions were deferred until a second summit on Wednesday.
"I'm afraid it could be a 'buy on rumour and sell on fact' thing. Investors are likely to trim down positions nearer the announcement day and much has been priced into this EU summit. So there could be room for disappointment," said Frances Cheung, senior strategist for Credit Agricole CIB in Hong Kong.
Dollar/won hit a five-week low of 1,124.5 on selling by offshore funds and by stock inflows. It broke through a 100-week moving average of 1,132.7 and the 50 percent Fibonacci retracement at 1,128.6 of its rise between Aug and Oct.
The pair came under more pressure from exporters' supplies.
Spread between one-month and one-year dollar/won NDF rates slightly widened, while spreads between the short-end and the long-end other dollar/Asian currencies NDF rates got narrower or stayed stable, indicating the spot won may outperform Asian peers.
Dollar/baht slid as a dealer said offshore players including Japanese names sold it with the pair pressured by catch-up plays.
"Offshore players and Tokyo center sold USD this morning down to 30.77," said the Bangkok-based dealer.
That comes as Japan offered extra loans, insurance and a baht cash line to help Japanese companies whose Thai factories have been damaged by devastating floods.
But the dealer looked for chances to buy on dips amid worries about the floods, saying the pair would be supported around 30.70-30.75.
Thai financial markets were closed on Monday for a public holiday.
Dollar/Philippine peso fell on risk appetite and inflows, but its falls were limited by a wider trade deficit in August.
Philippine imports in August rose 10.4 percent from a year earlier, the fastest growth in four months, government data showed.
US dollar/Singapore dollar stayed in a tight range, with markets awaiting details of the EU's plan to tackle the debt crisis.
The pair popped up to 1.2661 but retreated after fresh record-high yuan fix triggered selling interests.
Failure to break 1.2600 on the central bank's intervention has stalled falls so far.
Copyright Reuters, 2011