SINGAPORE: Most emerging Asian currencies eased on Thursday, with the won dragged lower partly by new North Korean threats, but regional units pared some of the losses after a strong Chinese factory survey suggested a sustained recovery in the world's No. 2 economy.
Regional units started the day weaker as disappointing earnings from Apple Inc dented risk sentiment and caution lingered over potential intervention by monetary authorities to check appreciation of their currencies.
However, they found relief after the HSBC flash purchasing managers' index (PMI)showed growth in China's giant factory sector accelerated to a two-year high in January.
"Asian FX may rise further because better China PMI means better exports and growth for the region, although they can see short-term corrections due to weakened risk appetite," said Saktiandi Supaat, head of FX research for Maybank in Singapore.
Continuous signs that China's economy has stabilised have driven most emerging Asian units higher this year, along with hopes for inflows to the area due to policy-easing by major central banks.
But regional currencies are unlikely to extend gains from here as they already reflect China's growth story, some dealers and analysts said.
"Markets are positioning long in the rupee and the won. So I like to buy dollar/rupee and take profits on dollar/won shorts," said BNP Paribas currency strategist Thio Chin Loo in Singapore.
The Indian rupee underperformed regional peers on Thursday as investors covered dollar-short positions before a holiday on Friday.
Maybank's Supaat also said some emerging Asian currencies may not benefit from China's recovery momentum due to their own issues such as political uncertainties.
"Each Asian currency now has its own idiosyncratic country specific risks," said Supaat, citing the Indonesian rupiah and the Malaysian ringgit as currencies that could fall in the short-term.
The rupiah has been under pressure from worries about current account deficits, while investors reduced long positions in the ringgit amid caution before coming elections.
Financial markets in Malaysia and Indonesia were closed on Thursday.
WON
The won earlier hit 1,070.2 per dollar, its weakest since Dec. 28, as investors added bearish positions in the South Korean currency after they were disappointed with Apple's results and wary of possible intervention.
Local importers joined dollar bids, dealers said.
It briefly turned higher on exporters' month-end demand and the healthy China PMI,
But the South Korean unit came under pressure again after the North said it would carry out further rocket launches and a nuclear test that would target the United States.
"Near term risks in USD/KRW appear to be much more evenly balanced now and risk/reward is not great to enter into either short USD/KRW or short JPY/KRW," said Westpac in a note.
"The Korean authorities are clearly concerned at the pace of recent moves and while the trend in both pairs is lower over the coming 6 months, we can't help but feel better entry levels to such trades will materialise in the weeks ahead," Westpac said.
BAHT
The baht fell as short-term investors covered dollar-short positions amid caution over intervention to check the best performing emerging Asian currency this year.
The wariness grew as the country's exports in December fell from the previous month and increased less than expected from a year earlier, data showed on Wednesday.
But the baht recouped some of earlier losses as investors were lined up to buy it at 29.85 per dollar on hopes for inflows, dealers said.
Thailand's central bank said it was not seeing signs of excessive speculation in the baht but it continued to monitor the currency's movements closely.
PHILIPPINE PESO
The peso eased as investors covered dollar-short positions as global risk appetite weakened after disappointing Apple results.
Investors also stayed cautious over potential intervention by the central bank to slow the peso's appreciation, as its agent banks were spotted buying dollars below 40.60, dealers said.
But the Philippine currency recovered some of its earlier losses after the strong China factory survey.
"There is a strong support around 40.50 for dollar/peso, but I don't see big onshore dollar demand yet," said a foreign bank dealer in Manila.
"Until I see 40.85 is broken, dollar/peso would still remain a sell on rallies story," the dealer added.
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