Won, ringgit move higher

The won and the ringgit rose on Wednesday after Italy's prime minister's pledged to resign, but gains in emerging Asian currencies were limited by profit taking as investors worried over the prospect of prolonged political uncertainty in the debt-ridden eurozone member.
Prime Minister Silvio Berlusconi said on Tuesday he would leave the post after parliament approves a budget law that includes reforms demanded by Europe. Hopes for passage of the reforms boosted stocks and other emerging currencies such as the Brazil's real. Still, Italy looks set for lengthy political ambiguity with Berlusconi's centre-right party calling for an election, dissuading investors from chasing riskier asset such as emerging Asian currencies. Yields on Italian 10-year bonds hover above 6.7 percent, creeping up to levels seen as unsustainable.
"The political situation remains very uncertain in Italy. Even with a change of government, will the new government still be able to meet austerity targets? That remains a big question," said Jonathan Cavenagh, foreign exchange strategist for Westpac in Singapore. "Risk appetite remains skittish at the moment and liquidity poor. Investors are reluctant to take positions and I think it's going to remain choppy into year-end," he said, adding he preferred selling emerging Asian currencies on rallies.
Most Asian units have fallen so far this month on fears that European leaders will not be able to resolve the continent's debt problems. News of easing inflation in China did not help emerging Asian currencies as investors stayed focused on the eurozone, although the data renewed hopes that Beijing may tweak policy to support the economy.
Dollar/won fell as local speculators reduced overnight dollar-long positions. But the pair recovered some of its early declines as speculators covered dollar-short positions, eyeing possible dollar demand linked to Michelin's sale of a stake in Hankook Tire. The Singapore dollar fell.
Michelin said it sold all of its 9.98 percent stake in the South Korean tyre maker for 623 billion won ($555.7 million). Dealers said they have not seen dollar bids linked to the deal yet, though some said if foreign investors had bought the entire stake the impact of the deal on the won would be limited.
Importers relived dollar/won and a local bank dealer said their demand is likely to reinforce technical support at 1,110 for the time being. The level is the session's low of November 4 and the 61.8 percent Fibonacci retracement of its rise between October 28 and November 3 Dollar/ringgit slid, but interbank speculators covered short positions amid higher US dollar/Singapore dollar.
Players were also looking to buy dollar/ringgit ahead of a support at 3.1000. US dollar/Singapore dollar rose as the euro fell. The pair was better bid after China's producer inflation came slower than expected, deterring further selling pressures in the pair. Concerns over Europe's weak fundamentals and Italy added to support after the overnight drop. Dollar/baht eased on bond inflows and exporters' offers. But the pair could not fall more as other Asian currencies gave up some rises.