Won leads Asia FX gains; China weighs on rises

SINGAPORE: Emerging Asian currencies on Thursday gave up initial gains helped by progress in euro zone's rescue fund after China's weak yuan fixing and weak trade data prompted investors to take profit, pushing down some of the regional units.

A softer yuan dragged its proxy currencies -- the Malaysian ringgit and the Singapore dollar, which has underperformed as investors remain cautious ahead of the city-state's central bank policy meeting on friday.

"Asian currencies, especially those countries with strong direct trade reliance on China, may inadvertently see some weakness in near term if Chinese trade surplus declines, eventually translating to greater growth risk," said Saktiandi Supaat, head of FX Research at Maybank in Singapore, adding the data still looked in line with consensus to him.

China's trade surplus in September narrowed for a second straight month, indicating the world's No.2 economy is not immune to a global economic slowdown and the euro zone's debt crisis.

The South Korean won started local trade firmer than Wednesday's high and extended gains after strong Australia's job data prompted speculators to reduce dollar holdings.

But the South Korean currency gave up some gains with dollar-short covering after China's weak yuan fixing. Some players took profits from its recent gains.

The 1,150 per dollar level, an intervention low last month, is seen as resistance and 1,135-1,150 may be good levels to sell the won with a 100-day moving average at 1,133.3.

The local currency has gained up to 4.7 percent against the dollar from a 14-month low hit on Oct 4 with a rebound in the won cross-currency swap.

Currency investors showed muted reactions to the central bank's decision to hold interest rates as it has been widely expected.

The Philippine peso gave up some rises on dollar demand from fast money accounts and in non-deliverable forwards (NDFs).

The Indonesian rupiah edged up, but leveraged accounts sold the currency in NDF markets.

Still, some investors are eyeing for chances to buy emerging Asian currencies on dips.

"I don't see any problems to sell USD/AXJ as risk is recovering," said a Kuala Lumpur-based dealer, adding the yuan has not been weakening much compared with its Asian peers.

The won has fallen about 7.9 percent versus dollar since September, while the yuan has dipped just 0.2 percent.

"CNY is actually appreciating," he said.