Singapore dollar, ringgit down on EU disappointment

SINGAPORE: The Singapore dollar and the Malaysian ringgit fell on Monday as on profit-booking after finance ministers in Europe delayed a decision on a rescue package to Greece, suggesting emerging Asian currencies are still vulnerable to the euro debt crisis.

Euro zone finance ministers postponed a final decision on extending 12 billion euros ($17 billion) in emergency loans to Greece, saying Athens would first have to introduce harsh austerity steps and denting appetite for riskier assets such as emerging Asian currencies and stocks.

"There is still much scope for gnashing of teeth over Greece, so in the short term we would be concerned about further bouts of risk aversion," said Ashley Davies, senior EM Asia economist and FX strategist of Commerzbank in Singapore, suggesting emerging Asian currencies would stay weak.

European authorities are expected to eventually extend the emergence loans to Greece, which has said it needs by mid-July to avoid defaulting on its debt.

Still, investors remains worried about uncertainties, keeping an eye on the result of a vote of confidence the newly reshuffled Greek cabinet.

"A failure to pass this vote will either lead to elections or a coalition government, both of which will slow down the bailout process," said Kenneth Kan, head of emerging markets forex trading at Credit Agricole Corporate and Investment Bank in Singapore.

"We need to keep an eye out for this result but my money is on no confidence as I think that Greece is very divided at this moment."

Emerging Asian currencies have suffered profit-taking since May along with the euro on persistent worries about the euro zone's debt crisis and its possible contagion, as well as a slowing global economic recovery.

The regional units found some relief from hopes for a financial aid to Greece and data showing the global is slowing not as quickly as feared.

But investors remained reluctant to resume absorb the currencies, once a must-have item on stronger economic fundamentals and policymakers' inflation fighting.

SINGAPORE DOLLAR, RINGGIT

The Singapore dollar and the ringgit slid as interbank speculators covered dollar-short positions with euro zone finance minister failing to soothe worries about Greece debt crisis.

The local currencies are likely to stay weaker, tracking a weaker euro, dealers said.

"The EU side is all in disarray. It's like a discipline teacher who tells other people not do something but later does it, saying it's for survival," said a Kuala Lumpur-based dealer, suggesting investors are likely to stay away from risk currencies.

WON

The won erased all of its earlier gains on importers' dollar demand and as local interbank speculators covered dollar-short positions.

Foreign investors extended their selling spree in Seoul's stock market to a third consecutive session, putting further pressure in the South Korean currency.

Earlier, the won gained as much as 0.5 percent to 1,080.6 per dollar.

Copyright Reuters, 2011