Ringgit, won breaches supports; more Asian falls seen

SINGAPORE: The Malaysian ringgit and the South Korean won broke through major support levels on Monday and appeared poised for further losses, leading falls in emerging Asian currencies, as investors dumped riskier assets amid persistent worries about Greece's debt crisis.

Hedge funds, macro funds and leveraged names sold the ringgit, which posted its largest daily fall in nearly one year, but investors were still seen holding long positions in emerging Asian currencies overall.

‘This week, we should see downward pressure on the Asians on global risk aversion. Global risk sentiment may be risk off, until June when supposedly the Greece situation is decided on by EU,’ said Saktiandi Supaat, head of FX Research at Maybank in Singapore.

‘If 1.40 breaks in the euro, stops might carry it lower. So covering of short dollar positions will still proceed.’

Emerging Asian currencies had enjoyed healthy gains in the first four months of the year on inflows to the region backed by stronger economic fundamentals, policymakers efforts' to fight inflation and broad US dollar weakness.

However, they have recently suffered corrections on profit taking and outflows from emerging Asia, along with a weaker euro as well as falls in commodities.

Positions in the regional units have been reduced with some holding dollar-long positions, but those currencies have more room to fall, analysts and dealers said.

‘The market is still net short USD/Asia and the external environment is still very uncertain,’ said a US bank strategist in Singapore, adding players will have to cover those positions further.

Emerging Asian currencies are seen staying weaker against the dollar, though a weaker euro is still expected to provide investors with chances to buy the regional units versus the European currency, analysts said.

The euro slid to a two-month low against the dollar and hit a record low versus the Swiss franc on ongoing worries about the potential for debt restructuring by Greece.

‘Short EUR/Asia trades should continue to perform well for now and will keep my exposure in Asian against short positions in EUR, where poor sentiment looks to persist for some time,’ said Andy Ji, Asian currency strategist at Commonwealth Bank of Australia in Singapore.

RINGGIT

The ringgit shed 1.6 percent against the dollar, its biggest daily percentage loss since June 7 last year, on stop-loss selling by macro and leveraged accounts.

The Malaysian currency weakened past the 3.0400 resistance indicated by the daily Ichimoku cloud and is expected to head to 3.0700, the 200-day moving average.

‘The Greece problem is hurting risk and we should see more USD/Asia short covering,’ said a Kuala Lumpur-based dealer, adding dollar/ringgit would track the move.

WON

The won broke through the 55-day moving average as market players unwound positions and on further heavy selling of Seoul shares.

Initially, exporters provided some relief to the South Korean currency, but they disappeared in the market amid expectations for a further fall, dealers said.

The local unit is seen weakening more, probably to 1,102/3 per dollar, lows of dollar/won during November last year and February.

‘The trend change is very strong. Few players appear to hold short USD/KRW positions now, so it is expected to push towards 1,100 tonight,’ said a bank dealer in Seoul.

‘If I have to sell USD/KRW, I will wait until 1,100.’

An Asian bank dealer in Singapore said exporters would wait for cheaper levels to buy the won while importers would get busier to purchase dollars from now.

Foreign investors unloaded Seoul shares for an eighth consecutive session, their longest selling spree in a year, with the benchmark KOSPI down 2.64 percent.

They sold 3.35 trillion won ($3.09 billion) in stocks during the eight session.

SINGAPORE DOLLAR

The Singapore dollar weakened past 1.246 per the US dollar, the 38.2 percent Fibonacci retracement level of March-April strengthening trend.

If the euro falls below 1.40 versus the greenback, the city-state currency is seen sliding more.

Copyright Reuters, 2011