TOKYO: The dollar rose against emerging Asian currencies on Monday, heading for its biggest one-day rise against the Malaysian ringgit in nearly a year, as investors trimmed bets on risky assets on worries about Greece's debt woes.
The South Korean won dipped to its lowest level against the dollar in about a month in the wake of the Bank of Korea's surprise decision on Friday to leave interest rates on hold, and the Singapore dollar also eased against the US dollar.
"The dollar is pushing higher as concerns mount about the Greece situation in Europe," said Christopher Gothard, Head of FX for Brown Brothers Harriman in Hong Kong.
"Market sentiment has turned more cautious of late and that has led to pullbacks in Asian emerging market currencies," he added.
Emerging Asian currencies had been enjoying robust inflows to regional stocks and bonds based on stronger economic performance and tighter monetary policy amid ample global liquidity.
But they have suffered a pullback this month as investors booked profits and covered their bets against the US dollar.
The dollar posted a particularly sharp gain against the Malaysian ringgit on Monday, climbing 1.2 percent to 3.0325 , putting the dollar on track for its biggest one-day percentage rise versus the ringgit since June 2010.
"The consensus trades and most heavily positioned trades are backing up the most. This includes the dollar against the ringgit and the dollar against the Singapore dollar," said a currency analyst for a US bank in Singapore.
The dollar short-covering was taking place in both the spot market and NDFs, with hedge funds adding fuel to the dollar's rise, the analyst said. "Some of these guys sold into the lows and are forced to cut now," he added.
RINGGIT
The dollar surged against the Malaysian ringgit on the back of bids by leveraged accounts and interbank speculators.
The dollar rose as high as 3.0425 against the ringgit, its highest in about two months, stalling right around resistance at 3.043, the 76.4 percent retracement of the dollar's March to April side versus the Malaysian currency.
The next major resistance on charts lies at 3.0690, the dollar's mid-March high against the ringgit.
"What I would say is that the risks of a move higher in dollar/Asia have increased given the persistent weakness of the euro over the past week," said Nick Verdi, Asian FX strategist for Barclays Capital in Singapore.
"While that risk has increased, I wouldn't expect this to rotate into something more serious in which dollar/Asia would move significantly higher," Verdi added.
Indeed, Barclays Capital is forecasting that the dollar will drop toward 2.94 against the ringgit in the next three months and to 2.84 in a year's time, Verdi said.
SINGAPORE DOLLAR
The dollar rose to as high as 1.2510 but later fell back on fresh selling from leveraged accounts and proprietary traders. The euro's bounce off its intraday lows against the dollar on talk of euro-buying by Asian central banks helped trigger fresh selling in the US dollar against the Singapore dollar.
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