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Markets

Won, peso up on specs, stay cautious over Asia FX

SINGAPORE : The South Korean won and the Philippine peso rose slightly on Monday as speculators bought some of battered
Published August 22, 2011

Philippine pesoSINGAPORE: The South Korean won and the Philippine peso rose slightly on Monday as speculators bought some of battered emerging Asian currencies on dips, but regional units later gave up some of their gains on persistent worries about a global economic slowdown and the euro zone's debt crisis.

Investors will be eyeing Federal Reserve Chairman Ben Bernanke's speech on Friday for any hints on further policy easing which could keep the US dollar under pressre.

But Bernanke is not expected to unveil any major measures, and emerging currencies are likely to remain vulnerable to the current bout of risk aversion in global markets, analysts and dealers said.

"I don't think we are in the midst of a sustained rebound (in emerging Asian currencies) as volatility and further downside risk asset potential is still well possible," said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong.

"If we get a hint at QE3, I would suggest easing into structural short-USD positions. However, I am not too sure what the thirst of investors will be to be short the USD until financial market volatility calms," said Tihany.

Most emerging Asian currencies have firmed so far this year, but are off their highs as investors slash exposure to riskier assets amid worries that the US could slide back into recession and concerns that European leaders appear unable to contain the euro zone's debt problems.

Still, the regional units are still seen supported in the longer term by stronger economic fundamentals and healthier fiscal positions than in the West, while interest rates are higher than developed markets.

"I am still cautiously bullish on emerging Asian currencies. But we don't need to rush in with a lot of uncertainties in Europe and the US," said a Kuala Lumpur-based dealer.

"I will wait for Jackson Hole and decide after that," referring to the meeting in Wyoming at which Bernanke will speak.

WON

Interbank speculators cleared dollar-long positions, helping the won to stay firmer despite further selling of local equities by foreign investors.

The South Korean currency is also seen having a support around 1,090-1,095 per dollar as investors are cautious over possible dollar-selling intervention.

Offshore players also bought the country's treasury bond futures, offsetting their stock sales and supporting the local currency.

"Now, long plays look much more attractive. But the market is long and I would like to buy it (dollar/won) below 1,082," said a foreign bank dealer in Seoul.

Foreign investors marked their fourth consecutive session of selling stocks, unloading a net 239.2 billion won ($220.0 million) in shares, while they bought a net 984.7 billion won in treasury bond futures.

Meanwhile, the won is seen finding a support around 14.30 versus the yen.

There would be some chances to buy the South Korean currency against the Japanese unit around 14.30 and 14.50 with stops above the yen/won's 14.70, which is around the high of post March earthquakes in Japan. The pair has the 61.8 percent Fibonacci retracement level of its fall between March 2009 and April 2010.

PHILIPPINE PESO

Interbank speculators bought the peso but players remain reluctant to lift the Philippine currency too much on persistent worries about the US economy and the euro zone.

There was market talk of model funds using the peso as a funding currency.

Earlier, the peso strengthened to as firm as 42.53 per dollar, filling the gap in the previous session. That level has been seen as resistance.

"I expect the market to be very defensive until Friday," said a European bank dealer in Manila. "Personally, I think there would be no QE3 this Friday, although I think Bernanke will not close the door."

The dealer expects the peso to trade between 42.50 and 42.80.

The rupiah stayed weaker than a 55-day moving average on importers' end-month dollar demand for settlements, dealers said.

Foreign investors' large stock sales on Friday also are seen putting pressure on the Indonesian currency.

The rupiah eased 0.1 percent to 8,550 against the dollar, softer than the moving average of 8,536.

The moving average is seen as resistance for the rupiah ahead of the Bernanke's speech, a Japanese bank dealer in Jakarta said.

"USD liquidity onshore has been a bit tight in the past one month. another measure will be taken by the Fed and this will lead the movement of USD in coming months. That's why USD/IDR will move in tight range this week," the dealer said, adding the pair is seen moving between 8,535-8,565.

Dollar/rupiah has the top of the daily Ichimoku cloud around 8,565.

On Friday, foreign investors sold a net $203.4 million in Indonesian, compared with a 14-day moving average of net daily sales of $53.8 million, according to Reuters data.

BAHT

The baht edged down against the dollar on a weaker euro.

Investors were largely unfazed by news that Thailand's economy surprisingly contracted in the second quarter from the first, which will cloud the outlook for further interest rates.

"It will impact on FX soon, I guess. Now global economy is slowing down," a Bangkok-based dealer, adding the baht may weaken to 30 per dollar this week.

 

Copyright Reuters, 2011

 

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