SINGAPORE: The South Korean won breached a technical resistance level on Wednesday, helped by stock inflows, as most emerging Asian currencies gained on expectations the Federal Reserve would signal that interest rates will be stay near zero into 2014.
Investors stayed concerned over the euro zone's debt crisis due to the possibility of a messy Greek default, but they welcomed stabilising European money markets and declining debt yields on the continent.
Trading was subdued as financial markets in China and Hong Kong remained closed for the Lunar New Year holiday.
The US central bank, which ends its first policy meeting in 2012 later in the day, is seen signaling it is unlikely to start hiking interest rates until the first half of 2014, more than five years after cutting them to near zero, a Reuters poll showed.
Emerging Asian currencies are likely to stay firm on anticipation of prolonged ultra-low US interest rates and some signs of easing debt problems in Europe, analysts and dealers said.
"Even if the Fed maintains its policy stance, the recent improvement in the euro zone on ECB's actions already enhanced global liquidity environment. Asia will benefit more from the liquidity," said Jeong My-young, a currency strategist at Samsung Futures in Seoul.
"We may see some technical corrections after recent rises in Asian currencies, but recent breaks of resistance brightened their outlooks," she added.
The won strengthened past a 120-day moving average resistance at 1,129.6 per dollar as foreign investors extended their net buying in Seoul's stock market to a 10th straight session -- the longest streak since early May 2011.
The South Korean currency may strengthen further, probably to 1,122.0, the high of Dec 1. The next target is 1,115.8, the 76.4 percent Fibonacci retracement of its weakness between October and December.
Money market rates were treading lower, with more focus on the positive effects from the European Central Bank's ample funding operations aimed at easing a credit crunch in Europe and encouraging investors to buy debt, especially short-term maturities, from highly-indebted euro zone countries.
Spanish sale of three- and six-month debt on Tuesday met strong demand, driving down yields sharply to multi-month lows.
Still, investors are keeping an eye on talks over Greece's bond swap deal and took some profits from rises in emerging Asian currencies.
Greece kept hopes alive for a last-minute bond swap deal to avoid a messy default after euro zone officials sent talks back to square one by rejecting a final offer from the country's private bondholders.
Greece's private creditors also sought to salvage the talks, pleading with European officials to hammer together a deal before Athens tumbles into a chaotic default.
Without aid, Athens will not be able to pay back 14.5 billion euros in maturing bonds in March, unsettling the euro zone's financial system and potentially hurting the global economy.
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