SINGAPORE: Most emerging Asian currencies rose on Tuesday, tracking the euro's rise following a German court decision that it will rule on euro zone's bailout funds this week as scheduled, despite a legal challenge by a lawmaker.
The Singapore dollar hit a one-year high with the euro's rebound, and the Taiwan dollar was at its strongest in more than three months on buying by foreign banks, although the central bank was spotted slowing down its appreciation.
But analysts said the gains in emerging markets' currencies -- which typically represent greater risk appetite -- were limited because investors were waiting on the key German ruling as well as a policy meeting of the US Federal Reserve this week.
"The euro is seen having entered in an overbought territory and we have major events. So, it is difficult to chase Asian FX here," said Jeong My-young, Samsung Futures' research head in Seoul.
"In addition, a slowing global economy, especially Chinese market, kept weighing on sentiment. I don't see immediate boosts from China's recent spending plans as it will take some time to see their effects," Jeong added.
Most emerging Asian currencies have risen since last week on the European Central Bank's bond-buying plans and expectations of a third round of easing by the Fed to shore up the world's top economy.
Germany's constitutional court ruling will decide on Wednesday whether the country can legally participate in the euro zone's permanent bailout fund, a vital decision as the ECB can buy government bonds only in conjunction with the bailout fund.
The court said it would not postpone its long-awaited ruling on the legality despite a new legal challenge by a ruling party lawmaker. That helped the euro extend gains.
Few market players expect the court to rule the fund unconstitutional, but some think the judges could attach tough conditions on any future aid Germany may grant to other euro zone countries.
SINGAPORE DOLLAR
The Singapore dollar strengthened to 1.2327 to the US dollar, its strongest since Sept. 13, 2011.
But investors hesitated to chase the local currency further on caution over possible intervention by the central bank.
TAIWAN DOLLAR
The Taiwan dollar touched 29.620 versus the greenback, its strongest since May 29, in the island's main currency market on demand from foreign banks amid expectations for the Fed's more stimulus this week. Some exporters also bought the Taiwan dollar for settlements.
But the currency traded slightly weaker on the smaller foreign exchange market than main market as dealers said the central bank may have intervened.
The rare move bolstered caution over stronger intervention, dealers said. The central bank usually steps in the main currency market to keep the Taiwan dollar stable for exporters and discourage speculation, according to dealers in Taipei.
The intervention came as some traders had expected the central bank to allow the Taiwan dollar to appreciate temporarily before the Fed's meeting.
PHILIPPINE PESO
The Philippine peso barely changed as strong exports data offset caution over possible intervention by the central bank.
The peso started the domestic trade at a session low of 41.670 per dollar as investors were wary of dollar purchases by the authority.
The local unit recovered most of initial losses after the country's exports rose 7.8 percent in July from a year earlier, higher than a 4.3 percent growth in June, although electronics shipments dropped.
The central bank has not been spotted buying dollars yet, dealers said.
"I prefer to sell dollar on any rallies, given sound fundamentals," said a European bank dealer in Manila.
RUPIAH
The rupiah eased on dollar demand from domestic oil companies and local banks, dealers said.
But the Indonesian currency found some relief as foreign banks bought it before the finance ministry's bond auction later in the day. The government aims to raise 5 trillion Indonesian rupiah ($522.08 million).
A Jakarta-based dealer said foreigners were looking for Indonesian bonds on expectations of the Fed's quantitative easing this week.
"It is hard to say liquidity will improve or not with the Fed's QE3, but it will definitely ease pressure on the rupiah," the dealer added.
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