Won, Singapore dollar up as specs add Asia FX after China PMI

SINGAPORE: The South Korean won and the Singapore dollar rose on Tuesday, with interbank speculators buying emerging Asian currencies as regional stocks rebounded and after a survey on China's factory activity was not as bad as some had feared.

Still, investors were hesistant to build positions in emerging currencies too aggressively amid persistent worries about a slackening global economy and the euro zone's debt crisis.

"We saw a return of some appetite today in the late morning, but it will still be weighed down by global growth concerns and the euro zone situation, as well as worries about money market tightness issues," said Saktiandi Supaat, head of FX Research at Maybank in Singapore.

"Emerging Asian currencies could see some upside on better than expected economic data, but general risk aversion remains."

Early in the session, HSBC's China flash PMI showed factory activity was likely to slow slightly for a second straight month in August as sluggish overseas demand saps new orders, but gave no indication the world's second-largest economy was in for a hard landing.

The findings helped Asian stock markets extend initial gains and sparked some buying of regional currencies, though equities markets remained deep in negative territory for the month.

Investors are keeping an eye on flash PMI data for the euro zone due later in the day for clues on whether the region's deepening debt crisis is weighing on broader economic growth.

Activity in France's manufacturing sector contracted for the first time in more than two years in August, a purchasing managers' survey showed.

WON

The won rose as interbank speculators added dollar-short positions on a strong rebound in Seoul shares and on foreign investors' continuous bond purchases.

The South Korean currency found resistance around 1,078 during the local trade as importers bought dollars for settlements on dips.

The won has the 38.2 percent Fibonacci retracement line of its weakness earlier this month at 1,078.1 per dollar. Around the line, it also faces the top of the daily Ichimoku cloud, another support level for dollar/won.

Foreign bought a net 633.7 billion won ($584.7 million), overwhelming net stock sale of 71.7 billion won. Seoul shares ended up 3.9 percent.

SINGAPORE DOLLAR

The Singapore dollar extended rises after the country's inflation accelerated more than expected in July , putting pressure on the central bank to keep monetary policy tight and allow further appreciation of the currency despite the slowing economy.

Earlier, interbank speculators bought the currency but were reluctant to add lift it further on caution over intervention by the Monetary Authority of Singapore.

PHILIPPINE PESO

The Philippine peso gained on demand from leveraged funds and macro names. Interbank speculators also joined the bids.

The peso faced resistance around 42.35 per dollar, near the 50 percent retracement of its weakness earlier this month, amid dollar-buying intervention by the central bank.

Earlier, a European bank dealer says he saw strong dollar-bids at 42.35, although it is uncertain if the bids are from the central bank.

Copyright Reuters, 2011