Asian currencies up in January

The Indian rupee was headed for its best monthly performance in more than 17 years, leading the gains that most Asian peers had in January, boosted by inflows into the region's stock and bond markets. Some dealers and analysts expect more funds to come in, thanks to weakening concerns about the European debt crisis. Reduced worries lifted Asian stocks this month, helping attract more investments into the region.
The region's currencies are expected to sustain their gains in February, although there may be some technical correction as investors will continue to worry about Europe until the crisis is decisively resolved. "It all depends on the situation in Europe. If that was out of the equation, I am quite bullish on Asian currencies," said Adam Gilmour, head of FX & derivatives sales of Citigroup in Singapore when asked if emerging Asian currencies could extend gains in February. Some real money investors are returning to Asia but most of them remain reluctant to add Asian assets, given the concerns, he added.
In January, the rupee has jumped about 7.3 percent against the dollar, the largest monthly gain since the last month of 1994, according to data available on Thomson Reuters. The rupee's January gain followed a 16 percent drop in 2011 on foreign outflows and growing concerns about the current account deficit. It was Asia's worst performing currency last year.
The Malaysian ringgit is the second strongest emerging Asian currency in January, having gained 3.9 percent versus the greenback. "People are happy playing short dollar/Asia. There will be some corrections (in Asian currencies) but will be very shallow because everybody is waiting to sell the rallies," said a senior dealer at an Malaysian bank in Kuala Lumpur.
US dollar/Taiwan dollar hit a 4-1/2 month low, briefly breaking through a 200-day moving average on foreign stock inflows. But the pair's slide was limited by heavy US dollar buying by Taiwanese importers and the central bank's intervention, dealers said. Some foreign banks covered short positions as the pair's 14-day Relative Strength Index (RSI) fell to 17.74, well below the 30 threshold, indicating it is in oversold territory.
Foreign investors bought a net 19.826 billion Taiwan dollars ($666.62 million) in stocks on Monday, their biggest daily purchase since October 28. Dollar/won fell as exporters sold it for end-month settlements and speculators cut long positions. Earlier, South Korean President Lee Myung-bak toughened his rhetoric on fighting inflation despite a cooling economy.
Dollar/ringgit slid on firm euro and Australian dollar, although some interbank speculators covered short positions around 3.0400. A break below 3.0500 triggered more selling pressure from leveraged and macro names. Traders are still looking for chances to sell the pair on rallies, given the dollar's general weakness. US dollar/Singapore dollar fell as macro accounts and longer-term funds sold it.
The pair earlier came under further pressure as interbank speculators rushed to cut long positions when it broke through 1.2550. The dealer saw the pair having room to rise to 43.20 and 43.50. It has a 200-day moving average at 43.182 and a 55-day average of 43.581, respectively.