Ringgit leads Asia FX lower; may slide more

SINGAPORE: The Malaysian ringgit fell on Tuesday, leading other regional currencies lower on worries the sagging global economy and slow progress on the European debt crisis may cause more pressure on emerging Asian units.

Some offshore funds and interbank speculators sold emerging Asian currencies more after data showed China's factory activity in October was its slowest since February 2009.

The euro slipped below 1.40 due to doubt over how measures agreed among the euro zone leaders last week could be implemented.

"I prefer playing USD/Asia from the long side so long as EUR fails to trade back above 1.4000. Growth momentum is still cooling within the Asian region so I ultimately think we get higher levels in USD/Asia in coming weeks," said Jonathan Cavenagh, foreign exchange strategist for Westpac in Singapore.

The ringgit lost up to 1.1 percent against the dollar to fill a gap seen late last week as interbank speculators sold the Malaysian currency.

Greek Prime Minister on Monday called an unexpected referendum on the bailout deal for the debt-ridden country with the Italian bond under persistent selling pressure, renewing concerns over the continent's debt problem and dampening other risk assets such as Asian stocks.

With the worries, emerging Asian currencies lost their rising momentum from last month, although some speculators looked to chances to buy on dips.

"As the gap was filled, I will just sell (dollar/ringgit) here. The 3.100 is psychologically important level," said a Kuala Lumpur-based dealer.

The dealer said the market positions were almost neutral, adding some are looking to sell the ringgit with a target of 3.2000 per dollar.

The Indonesian rupiah slid as offshore funds including leveraged funds bought dollar/rupiah non-deliverable forwards (NDFs).

But investors stay cautious over possible dollar-selling intervention by the central bank, especially if the rupiah tests 8,900 per dollar.

The South Korean won eased, but recovered most of its earlier falls as local exporters bought it for settlements.

Westpac's Cavenagh said he would sell the won on dips if it strengthens to 1,100 per dollar again, where it reached on Monday -- near its 200-day moving average resistance of 1,100.40.

He would also look to sell the Singapore dollar if the city-state's currency firms to 1.2400, although there are "event risks" later this week such as policy meetings by major central banks including the Federal Reserve.

Copyright Reuters, 2011