SINGAPORE: The South Korean won hit a three-year high and the Singapore dollar rose to a record on Friday as macro and hedge funds chased emerging Asian currencies ahead of key data from the United States, though technical indicators suggest some of the regional units may be approaching overbought territories.
Continuous inflows to Asia seeking higher yields and stronger economic fundamentals are expected to keep regional currencies firm, but there may be some short-term correction, especially if the US payroll disappoints investors, analysts and dealers said.
A report on Thursday showing US companies hired four times more workers in June than in May prompted several economists to raise forecasts for the government's non-farm payrolls count due later in the day and bolster hopes the world's biggest economy may have firmly turned a corner.
"If US job data is disappointing, emerging Asian currencies, especially the won, are expected to see corrections, given the expectations that were created by the ADP," said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong.
Most emerging Asian currencies ended the week in positive territory as investors poured money into the region amid easing concerns over the Greek default and slowing global economic recovery.
The baht which has been the worst performer this year because of the domestic political uncertainty, has turned into this week's winner after the general election last weekend.
However, some currencies may be overbought, charts show.
The 14-day dollar/won and dollar/ringgit Relative Strength Indices (RSIs) fell to their lowest since early May when their RSIs fell below 30, indicating those pairs were oversold.
Asian foreign exchange authorities such as the Philippine central bank were spotted buying dollars, which may lead some market players to cover their short-dollar positions.
Still, the long-term outlook for the currencies remains positive, on account of continuing inflows, analysts and dealers said.
Regional central banks are unlikely to reverse the trend or defend certain levels as they are still fighting inflation, they added.
Inflows to Asia, especially fixed-income flows, should be strong, given debt problems in the US and Europe, said a European bank strategist in Singapore, adding that he prefers to stay short dollar/emerging Asian currencies.
SINGAPORE DOLLAR
The Singapore dollar hit a record high against the US dollar on heavy demand from macro funds and real money accounts.
Swiss and German names were touted heavily buying the city-state's currency after the US dollar/Singapore dollar broke through its previous low of 1.2212.
The Singapore central bank was seen buying US dollars at 1.2200 but pulled off bids, dealers said.
WON
The won touched a near three-year peak against the dollar on continuous inflows to the country's stocks and expected demand liked Kookmin Bank's stock in its parent.
KB Financial group unit Kookmin bank has sold $1.7 billion in treasury shares in its parent via a block sale.
Market sources said 75 percent of the shares were taken by foreigners, mostly long-term investors, and dealers are keeping an eye on bids for the South Korean currency linked to their purchases.
Traders said foreign exchange authorities were buying dollars, especially when the local market closed, limiting the won's further gains.
Despite caution over the intervention, the won is likely to stay firm, dealers said.
"It is matter of time to test 1,050. There are sufficient demand to boost the won and the authorities are not that aggressive," said a local bank dealer in Seoul.
The ringgit rose 0.7 percent to as strong as 2.9865 on demand from hedge funds and fixing-linked bids.
But the dollar/ringgit found support around the June 6's low of 2.9900, which will create a double bottom formation on the daily charts if it holds.
Investors have built up dollar-short positions to cover while many remain cautious over intervention.
The central bank is unlikely to just wait-and-see if the pair falls more quickly with its intervention spotted, dealers said.
Some analysts see risks of correction, especially if US job figure is disappointing.
"One concern from today's MYR strength is that in part it could be a reaction to sudden sell off overnight and indeed MYR has been susceptible to swings lately, so if it is due to strong speculation flows and not fundamentally driven, if US private NFP is weak, the MYR may go back above 3.00," said Saktiandi Supaat, head of FX Research at Maybank in Singapore.
BAHT
The baht kept rising on heavy demand from real money accounts. Foreign banks, which had sold the Thai currency earlier, turned to buyers.
The central bank was spotted buying dollars, but the purchases were not that strong, dealers said.
Earlier, Thailand's prime minister elect, Yingluck Shinawatra told Reuters that her government would not influence the direction of the Thai baht, saying the currency should be left entirely to market forces.
Copyright Reuters, 2011
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