Fund redemptions hit baht, Philippine peso

SINGAPORE: The Thai baht and Philippine peso fell on Monday, with talk of equity fund redemptions driving investors to sell off what had been two outperforming Asian currencies earlier in the year.

Authorities in Thailand, Indonesia and Malaysia were battling the market on Monday, selling US dollars from their reserve stockpiles to protect their currencies, though South Korea notably did not intervene.

The outlook on emerging markets globally is dark as most dealers are looking for chances to sell those units on rebounds on persistent worries about the euro zone's sovereign crisis. A sharp decline in emerging market currencies has preceded broader weakness in risky assets.

"I will keep buying dollar/Asia on dips as we have not seen signs of an end in the crisis yet," said a senior currency dealer at a European bank in Singapore.

"Asian authorities are expected to keep intervening, but their intervention would be a just temporary tool, which will not be able to stop the trend."

Emerging Asian currencies have been pressured by dollar-demand in non-deliverable forwards (NDFs) from leveraged and institutional investors, who have over the past few weeks rushed to hedge against more local currency weakness. Some funds were building up dollar-long positions against the regional units.

Last week, the Singapore dollar, once the safe-haven in Asia, posted the largest weekly percentage fall by losing 4.6 percent against the US dollar, according to Reuters' calculation based on the central bank data. The Indian rupee also saw the worst week in more than 15 years.

The losses came as other emerging currencies and growth-linked units broadly fell. The Brazil's real lost 7.5 percent last week, although the central bank's sale of $2.75 billion of currency swaps limited its falls.

On Monday, the Australian dollar also fell to a 10-month low against the US dollar.

WON

The won slid to a one-year low versus the greenback, wiping out Friday's intervention-driven gains, without signs of dollar-selling by the authorities.

The South Korean currency ended local trade at 1,195.8, slightly stronger than Friday's 1,196.0, the softest since early Sept last year.

Earlier, the won had found some relief from bond inflows, but investors dumped the unit again with no sign of authorities.

"There is a consensus that the authorities will defend 1,200 after last week's intervention. But people are using strategies to buy it (dollar/won) until levels where the BOK is seen and sell it there, given no sellers except the BOK," said a trading head of a foreign bank in Seoul.

After domestic market closed, Deputy Finance Minister Choi Jong-ku said the country will closely monitor any speculative trade behind the recent won's falls.

SINGAPORE DOLLAR

Macro funds, leveraged accounts and US investment banks pushed the Singapore dollar down to near the 50 percent retracement level of its appreciation between June 2010 and July this year.

The city-state's currency also suffered from stops in US dollar/Singapore dollar above 1.3050, while macro funds bought the pair from 1.2915, dealers said.

BAHT, PHILIPPINE PESO

The Thai baht and the Philippine peso suffered from fund redemption, which hit local stocks, and the currencies are expected to weaken more.

Thai stocks and Philippine shares tumbled a near 9 percent and more 4 percent, respectively.

The baht weakened to as soft as 31.26 per dollar, the softest since late January, breaching the support of 31.00, the level which was where a rejection of dollar/baht's rally was seen just ahead of the Thai election earlier this year.

If the Thai currency stays weaker than that 31.00, it is seen weakening to 31.21-31.29. The 31.29 is the low of Jan 31 and 31.21 is a 100-week moving average.

The Thai central bank was spotted selling dollars from 31.05 level, dealers said, while real money funds kept selling it.

A deputy governor said the central bank is ready to act on excessive move in the baht.

The Philippine peso shed as much as 0.7 percent, weakening past the 61.8 percent retracement of its appreciation between January and August.

The peso may head to 44.02, the session's low of 44.02 per dollar on March 17, while it also has the 76.4 percent retracement around the level.

RINGGIT

The ringgit lost 0.7 percent against the dollar as interbank speculators continued to build up dollar-long positions.

"We stay long as the euro is below 1.3460," said a Kuala Lumpur-based dealer.

But the Malaysian central bank was spotted selling dollars to limit falls in its currency, dealers said.

The central bank was seen at 3.1820 per dollar earlier and it moved dollar offers to 3.1880 and 3.1900 later, they added.

Copyright Reuters, 2011