Ringgit, peso breach support, Seoul seen capping falls

SINGAPORE: The Malaysian ringgit and the Philippine peso briefly broke a technical support lines on Monday with most of their Asian peers suffering from dollar-short covering amid sustained uncertainty over the Greek parliament's decision later this week on austerity measures.

The won recovered some of its earlier losses as South Korea's foreign exchange authorities were spotted selling dollars and other Asian central banks may try to cap falls in their currencies, but emerging Asian currencies may stay under pressure, dealers and analysts say.

"Markets in Asia in particular and authorities in the region are still underestimating the impact of Greece on international markets, we may be on the cusp of another major crisis in the form of sovereign default, in less than 3 years since the last crisis - the credit crisis," said Suresh Kumar Ramanathan, regional rates and foreign exchange strategist for CIMB Investment Bank in Kuala Lumpur.

"We will witness further losses for AXJ currencies," he said.

Greece's deputy prime minister warned on Sunday that rebel lawmakers may block some specific reforms, but added that parliament will probably back an overall austerity package to avert national bankruptcy.

Emerging Asian currencies have given up some of the gains they made earlier this year due to worries about the Greek debt crisis and a slowing global economic recovery.

They may face further pressure from quarter-end dollar demand for fund repatriation by US investors, especially ahead of the completion of Federal Reserve's second quantitative easing programme, some dealers said.

But emerging Asian currencies may find support as regional exporters will buy them for the end of the second quarter, other dealers said.

RINGGIT

The ringgit briefly broke through a 200-day moving average, a long-term technical indicator, as investors covered dollar-short positions, although it recovered some losses on the euro's rebound to stay stronger than the level.

If the Malaysian currency ends the day weaker than the average of 3.0604 per dollar, it should signal a change in trend, at least for the intermediate term.

"The Greece situation is getting more pessimistic," said a Kuala Lumpur-based dealer, adding that the ringgit could weaken further.

With the currency crossing the level, it is seen heading to 3.0636, the 50 percent retracement of its strengthening trend between December last year and April.

PHILIPPINE PESO

The peso weakened past 43.596 per dollar, a 200-day moving average.

It recovered some losses to remain firmer than that level, but not far from it.

If the Philippine currency ends the day weaker than the level, technically it has room to weaken to 43.663, the 50 percent retracement of its strengthening trend between January and May.

BAHT

The baht hit its lowest in more than four months against the dollar, weakening past 30.69 per dollar, the 61.8 percent retracement of its gaining trend between January-April.

The Thai currency came under pressure from gold importers' dollar demand and sustained concerns about political uncertainty ahead of a general election on this weekend.

"USD sentiment is strong overall on month-end demand and political risk," said a Bangkok-based dealer, adding that the baht would weaken to 31.00.

Technically, it has a room to weaken more, probably to 31.10, the 50 percent retracement level of its strengthening trend between June 2010 and November. If that level is broken, it may head to 31.19, the low of January 31 this year.

"THB's propensity to weaken off ahead of the election has been rather surprising considering its ability to weather last year's political turmoil, but the uncertainty over the electoral outcome is leading to heavy pressure on THB via foreigner selling of domestic equities," said Scotia Capital said in a note.

SINGAPORE

The Singapore dollar briefly breached 1.2430 per the US dollar, the 61.8 percent retracement level of its gains between May and June, on sales by European banks.

The city-state's currency rebounded to stronger than the retracement line, but it remained under pressure as it weakened past a 55-day moving average of 1.2376 on short-covering.

"It's generally risk-off hence we are seeing higher USD/Asia and USD/SGD," said a US bank dealer in Singapore, adding the local currency is expected to weaken past the retracement level.

If the Singapore dollar breaks through the level, it may head to 1.2443, the low of June 16, and 1.2459, the 23.6 percent retracement of it gains between November last year and May.

WON

The won weakened past a 60-day moving average on dollar-short covering, but dealers said Seoul's foreign exchange authorities limited its falls by intervening to sell dollars.

Earlier, the South Korean currency weakened to as soft as 1,088.7 per dollar, breaking through a 50 percent retracement level of its rise between May and June.

But it recovered some to end local trade at 1,085.6 as dealers spotted the authorities' dollar sales and exporters' demand for settlements.

This will be the second time Seoul has sold dollars after doing so on June 16, when it weakened past 1,090, dealers say.

"Rises were capped whenever it reached 1,088. I suspect intervention," said a foreign bank dealer in Seoul.

Copyright Reuters, 2011