SINGAPORE: The South Korean won and the Thai baht fell on Wednesday as finance ministers of the countries warned against excessive appreciation after Japan's central bank eased monetary policy to revive its ailing economy.
South Korea's finance minister reiterated the country's commitment to fight rapid gains in the won.
"The problem is that the rate of the won's appreciation has been rapid, which leaves little time for key economic entities to prepare," Finance Minister Bahk Jae-wan said at a conference in Seoul.
"The government will continue its efforts to minimise the won's volatility in order to reduce uncertainties."
Thailand's finance minister also said he had asked the central bank to "take care" of the baht's strength.
Those comments caused investors to reduce bullish bets on the won and the baht. The Philippine peso also eased on views that the central bank will not allow it to strengthen past 40.55 per dollar.
Foreign exchange authorities in the region have been concerned over weaker export competitiveness and hot money inflows due to rapid appreciation in their currencies.
Regional currencies have been benefiting from monetary policy easing stances of major central banks, especially the Bank of Japan, as investors seek higher yields with cheap money.
On Tuesday, the Bank of Japan said it would double its inflation target to 2 percent and switch to an open-ended commitment to buying assets next year, under strong political pressure to lift Japan out of recession.
But some analysts saw risks of buying emerging Asian currencies with the yen as the Japanese currency rebounded on some disappointment over the BOJ's latest easing.
"If Asia-ex Japan currencies are to be bought via shorting the yen, the question to be asked is how much potential yen weakness is ahead," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur.
"A breach above 95 and marching towards 100 would make going long Asia ex-Japan currencies a good trade proposition. Until then, the market may need to evaluate the potential smoothness of switching funding currencies from the dollar to the yen."
The yen rose 0.7 percent to 88.14 to the dollar. Emerging Asian currencies also slid against the yen.
WON
The won slid as the South Korean finance minister's warnings prompted investors to cover dollar-short positions and importers bought the greenback for payments.
Bahk Jae-wan said the government was ready to implement measures to smooth the won's volatility, but he did not elaborate.
Heightened caution over such measures was expected to form resistance for the won at 1,060 per dollar, dealers said.
But it is unlikely to change the won's appreciation trend, they added.
"The 1,060 level is getting firmer due to their determination and foreigners' recent stock selling," said a senior foreign bank dealer in Seoul.
"But it still looks better to buy the won whenever it falls. Exporters never miss chances to buy it on dips. Unless the authorities intentionally push the won down, dollar supplies will dominate market forces," said the dealer, expecting the won to move between 1,060 and 1,075.
BAHT
The baht eased as the Thai finance minister warned of volatility in the best performing emerging Asian currency far this year.
"A strong baht is good for imports, such as energy, but we don't want it to be too strong as that will affect exporters and tourism," Kittirat Na Ranong told reporters on Wednesday.
"Stability is important and in the short term the government has asked the central bank to take care of volatility. We will leave this to the central bank, without political intervention," he said.
RINGGIT
The ringgit edged lower on caution before the upcoming elections.
Initially, the Malaysian currency gained as some interbank speculators buying it and on demand from exporters, especially when it was weaker than 3.0400 per dollar.
Still, investors hesitated to buy it as funds and custodian banks remained dollar buyers.
"The market is on an election watch and the ringgit is within a clear range between 3.0300 and 3.0500," said a Malaysian bank dealer in Kuala Lumpur.
Comments
Comments are closed for this article.