SINGAPORE: The South Korean won rose on exporters and the Singapore dollar advanced on policy tightening expectations on Wednesday, leading broad gains in emerging Asian currencies, but analysts said they remained vulnerable to further increases in oil prices.
US crude oil futures hit a 2-1/2-year high on worries that political turmoil in Libya could spread to other major oil producers in the Middle East and cut more output.
Higher energy bills will pressure Asian currencies, as they will hurt current accounts and could act as a brake on economic growth. At the same time, they will exacerbate inflationary pressures, which have caused investors to book profits and stay away from emerging Asia early this year.
"The market tends to view most solid bounces in USD/Asia as good selling opportunities form a medium term perspective but I'm not sure how much Asian currencies will rally from here, said Jonathan Cavenagh, currency strategist at Westpac in Singapore.
Investors are more likely to take a wait-and-see attitude, keeping an eye on situations in the Middle East and their impact on oil prices, analysts said.
"The market is still very ambivalent about the outcome in the Middle East. Hence no one has put on massively big positions one way or the other," said Woon Khien Chia, head of local markets strategy of The Royal Bank of Scotland PLC in Singapore.
WON
Dollar/won turned lower as exporters' sales for end-month settlements prompted investors to clear dollar-long positions to stop losses.
The pair ended local trade down 0.3 percent at 1,124.0 from its previous close of 1,127.6. Earlier, the pair rose to 1,134.0, the highest since Dec. 30 last year.
Dollar/won is seen consolidating in the recent range between 1,110 and 1,130 for the time being, dealers said.
"It looks difficult to return to above 1,130 again as players see the level as top of the recent range and given exporters' offers," said a local bank dealer in Seoul.
SINGAPORE DOLLAR
Dollar/Singapore dollar fell as a higher-than-expected consumer inflation reading in January and a strong euro made it easier for interbank players to sell the pair on expectations of further MAS policy tightening.
Singapore's annual inflation spiked to 5.5 percent in January, far higher than expectations of around 4.65 percent, which analysts said increased the likelihood of the central bank tightening policy again at its next review in April.0
"Given market consensus of MAS tightening in April, players like to sell USD/SGD around these levels," says a senior European bank dealer in Singapore.
The Singapore dollar has been the exception to fears this year about inflation in Southeast Asian countries because MAS is viewed by market players as proactive about rising prices.
RUPIAH
The dollar/rupiah slid on selling linked to non-deliverable forward (NDF) fixing, dealers said.
The rupiah is seen consolidating in a short term as investors are keeping an eye on inflation data next week, they added.
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