SINGAPORE: Most emerging Asian currencies rose on Tuesday -- and headed for monthly gains -- as investors increased their bets that the European Central Bank and US Federal Reserve would take steps to stimulate economic activity.
The South Korean won hit a near three-month high fueled by exporters' demand and stock inflows. The Malaysian ringgit touched its strongest point in more than six weeks as interbank speculators chased the currency.
The Fed will start a two-day policy meeting later on Tuesday while the ECB will meet on Thursday. ECB President Mario Draghi pledged last week to do whatever was necessary to protect the euro zone from collapse.
"With reputations on the line, the central banks have to satisfy the markets because they have no choice or anything they do will be taken with a grain of salt in future," said a European bank dealer in Manila.
If the ECB and the Fed take stimulus measures, emerging Asian currencies are likely to rally further as investors are spurred to seek riskier but higher yielding units, he added.
Most emerging Asian currencies rose in July, led by the Singapore dollar, according to Thomson Reuters data.
The city-state's currency has risen 1.6 percent against the US dollar so far this month as investors sought a safe haven in Asia. Singapore has a triple A credit rating.
The Singapore dollar also benefited from expected inflows linked to a battle between Heineken and a Thai billionaire for control of the brewer of Tiger beer, one of Singapore's iconic brands.
If the central banks do not announce stimulus moves, corrections among emerging Asian currencies can be expected.
"There is still false hope about the ECB and Fed," said Adam Gilmour, head of FX & derivatives sales at Citigroup in Singapore.
If Draghi's words are not followed by actions, he said, "there is a decent risk of some derailment in the euro process."
Data released on Monday added to the urgency for European policymakers to act, with economic sentiment in the euro zone falling to near a three-year low as the bloc's economy deepened its slump and businesses became more pessimistic.
Even if the ECB acts on Thursday, there's no guarantee such action will boost regional units.
"Past actions have only fleeting impact on Asia FX," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur. "Markets are still not sure what to expect."
Meanwhile, Asia's economic picture is not encouraging enough to spur more demand for regional currencies with major exporters Japan, South Korea and Taiwan showing deepening signs of economic stress.
WON
The won rose as much as 0.7 percent to 1,129.9 per dollar, its strongest since May 3. The South Korean unit gained 1.3 percent against the dollar during July.
Between Friday and Tuesday, foreign investors bought a combined net 1.6 trillion won ($1.4 billion) worth of South Korean stocks, according to the Korea Exchange data.
Demand for the won linked to the stock purchases forced some investors to dump dollar holdings, which they had built up on expectation of a won slide. Offshore funds also joined bids for the won, dealers said.
Technically, the won has a resistance line at 1,129.2, the 76.8 percent Fibonacci retracement of its March-May depreciation. The next level would be 1,125.3, the session high on May 2.
RINGGIT
The ringgit advanced 0.5 percent to 3.1370 versus the greenback, the strongest since June 18, breaking through a technical resistance at 3.1400, the session high of July 4.
The Malaysian currency gave up some early gains with the euro off the session high.
The ringgit is seen having a major resistance at 3.1350, the high of June 18.
TAIWAN DOLLAR
The Taiwan dollar rose on demand from foreign financial institutions and as domestic exporters bought it for month-end settlements.
But the island's central bank was spotted selling the local unit to slow its appreciation, dealers said.
PHILIPPINE PESO
Interbank players lifted the Philippine peso on growing hopes for more stimulus from the Fed and the ECB.
Some investors were cautious over possible intervention by the central bank to stem the peso's gains, but dealers said they did not spot dollar bids from it.
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