Thursday, 03 January 2013 13:05
SINGAPORE: The Taiwan dollar and the Philippine peso led gains among emerging Asian currencies on Thursday, reflecting the brighter outlook for regional units, although their gains were checked by intervention.
The peso hit a near four-year high on hopes for more inflows and the Taiwan dollar touched its strongest in almost two months, helped by foreign financial institutions and exporters.
The South Korean won rose to a 16-month high on exporters' demand and equity inflows, dealers said.
But foreign exchange authorities in those countries were spotted buying US dollars to slow the rise in their currencies, dealers said.
The Singapore dollar eased amid caution over the central bank's intervention and on a weaker euro.
"The macro environment still has risks such as US fiscal tightening and its impact on the US economy. It is not all clear yet and central banks need to be cautious and guarded against too-rapid domestic currency appreciation," said BNP Paribas currency strategist Thio Chin Loo in Singapore.
"They wouldn't reverse the bullish trend if it is due to stronger data, but if it is because of capital inflows - and these can be speculative - they will be more cautious," she added.
Emerging Asian currencies started 2013 firmer after triggering of the US "fiscal cliff" was averted by Congress.
Regional units are likely to stay stronger as investors will keep seeking higher yields with increasing liquidity created by monetary easing bias of major central banks.
Growth in China's services sector accelerated in December at its fastest pace in four months, further improving the outlook for emerging Asian currencies.
But sharp currency appreciation is a headache for Asian authorities as it undermines export competitiveness and repatriated earnings.
Shares in Hyundai Motor Co, South Korea's top automaker, lost 4.6 percent on worries over the firmer currency as the won hit 12.1673 to the yen, its strongest since May 2010.
The Taiwan dollar touched 28.978 to the greenback, its strongest since Nov. 12 on inflows from foreign financial institutions and domestic exporters' demand.
Foreign banks also joined bids for the island's currency.
But the central bank was spotted actively buying US dollars to stem the Taiwan dollar's strength, especially when it was firmer than 29.000 to the US dollar, dealers said.
The central bank was on Wednesday estimated to have bought a third to a half of trading volume of $991 million, they added.
The Philippine peso hit 40.775 per dollar, its strongest since March 2008, according to Thomson Reuters data.
But the peso gave up some of initial gains on talk of intervention by the central bank.
"We might see dollar/peso move a bit higher first probably to 40.90-41.00 before resuming its downtrend again," said a foreign bank dealer in Manila.
Investors appeared to hold dollar-short positions and they may have to cover those bets, he added.
The won ended the local session at 1,061.5 per dollar, its strongest intraday level since Sept. 1, 2011.
Earlier, the South Korean currency slid as the authorities were suspected of buying dollars, dealers said.
But sustained demand from exporters and equity inflows prompted stop-loss dollar selling, dealers said. Some interbank names had built up dollar-long positions on more aggressive intervention, they added.
Still, investors stayed wary of potential steps by the authorities to curb the won's strength.
"The won's bullish trend stayed intact. But I am concerned over what regulatory cards the authorities will play," said a South Korean bank dealer in Seoul.
Finance Minister Bahk Jea-wan said on Wednesday the country is studying policy options to deal with the strength of the won.
In local bond markets, some dealers expect the central bank to cut interest rates to slow down the won's strength.
Center>Copyright Reuters, 2013