SINGAPORE: Emerging Asian currencies slid on Tuesday as investors reduced risky assets on fears of mass downgrade of European sovereign ratings, though they remained wary of potential dollar-selling intervention by regional central banks seeking to shore up their currencies.
The Indian rupee hit a new record low as concerns over the euro zone's debt crisis and signs of sharply cooling growth in Asia's third-largest economy triggered a scramble for dollars.
The euro recovered earlier losses on short-covering, but emerging Asian currencies failed to bounce, indicating sentiment toward the regional units remained weak.
Foreign funds and local interbank speculators sold emerging Asian currencies after rating agencies on Monday warned that Friday's European Union summit, which some saw as a last chance to save the euro, did not go far enough to ease immediate concerns about the continent's debt crisis.
The warnings hit stocks, the euro and commodities.
Still, some dealers and analysts said emerging Asian currencies have yet to fully price in potential rating cuts of euro zone members, which will dampen risk sentiment further.
"Asia ex-Japan FX seems to be underpricing this risk, and there will be more downside for Asia ex-Japan FX once a downgrade is done," said Suresh Kumar Ramanathan, regional rates and foreign exchange strategist for CIMB Investment Bank in Kuala Lumpur.
"Thin dollar liquidity as year-end approaches plus negative EU sentiment still plays in favour of shorting Asia ex-Japan FX."
Foreign exchange authorities in Asia are likely to continue to step into markets to prevent sharp slides in their currencies, but the interventions will just temper weakness, they added.
The Singapore dollar was barely changed as the Monetary Authority of Singapore was suspected of intervening, while the Indonesian central bank was spotted selling US dollars.
However, some dealers expect that the authorities might not sell dollars aggressively as a slowing global economy is biting into Asian exports.
WON
Dollar/won rose on foreign funds' demand, while South Korean exporters sold the pair before technical resistance at around 1,165, near the previous high.
Market players were wary of possible dollar-selling intervention by the foreign exchange authorities, capping the pair's rises.
"I don't expect further rises today. We may see intervention above 1,160," said a senior foreign bank dealer in Seoul.
But the pair may head to 1,206.9, the high on Oct 4, as no resolution to the European debt crisis after the last week's summit prolonged risk-off trade and on a weaker global economy.
It may be good to build up long positions around 1,153 with a target of 1,205 and a stop at 1,137, some analysts said.
RINGGIT
Dollar/ringgit rose above the 76.4 percent Fibonacci retracement at 3.1799 on fixing-related demand and as interbank speculators bought it.
"We may see foreign names dollar buying to repatriate profits back home from Malaysia. They should buy some dollar until the end of the year in every Asian country. The question is how large their dollar demand would be," said a Kuala Lumpur-based dealer.
"I don't mind being long on dips," said the dealer, adding the pair is seen rising to 3.2000 with a support at around 3.1500.
Currency players are cautious over possible dollar-selling by the central bank, but traders did not spotted such intervention.
PHILIPPINE PESO
Dollar/Philippine peso gapped up on short-covering on worries about potential cuts in European sovereign ratings and after weak Philippine export data.
The country's exports in October fell 14.6 percent from a year ago, a sixth consecutive slide.
But some traders looked to sell the pair on rallies, saying the market is not short for now.
"Right now, market still remains jittery. But I would not be surprised if there would be some short-selling here but with very tight stops," said a European bank dealer in Manila.
SINGAPORE DOLLAR
US dollar/Singapore dollar was little changed amid talk of intervention and as the pair failed to rise above 1.3040, the high on Nov 29.
Once the level is cleared, it may head to 1.3200, the high on Oct 3.
Fund outflows and repatriation before the year-end are seen keeping US dollar/Singapore dollar well bid.
But Forecast Pte's senior currency strategist Wai Tuck lee said dollar/won and dollar/rupee are expected to have more room to rise than US dollar/Singapore dollar.
He advised buying Singapore dollar/won and Singapore dollar/rupee.
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