Most emerging Asian currencies rose on Monday, helped by short-covering after a report that the International Monetary Fund was preparing aid for Italy, but gains were capped by sceptimism over whether European leaders can agree on bold enough measures to resolve the region's debt crisis.
An IMF spokesperson later said there were no discussions with Italian authorities on a program for IMF financing, encouraging traders to take profits on the early rally and paring emerging currencies' gains for the day. The Italian newspaper La Stampa had suggested the IMF was preparing a rescue plan worth up to 600 billion euros for Italy, more than the fund can currently provide on its own.
A European bank dealer in Singapore said his bank had gone back to square positions after the IMF statement. Dollar/won fell as offshore funds and interbank speculators cut positions, with South Korean exporters selling the pair for settlements. Dollar/peso eased, but a sharp and unexpected slowdown in third-quarter growth and worries about the eurozone limited its slide.
The government said it will be difficult to hit its full-year growth goal, raising the chances of a rate cut as early as this week. Foreign banks and interbank speculators sell dollar/baht to take profit from its recent rises, while some players were reluctant to join their selling on doubt over IMF's aid to Italy. Dollar/baht fell to as low as 31.22 earlier. The baht has lost 3.8 percent against the dollar so far this year, becoming the No 2 worst performing emerging Asian currency after the Indian rupee. US dollar/Singapore dollar slid as macro names were seen selling the pair.
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