Won recovers on foreign support, Singapore dollar up

SINGAPORE: The won cut its losses on Tuesday after a few regional central banks bought South Korean currency bonds for reserve diversification, while the Singapore dollar led a small bounce in other Asian currencies as shorter-term investors cut short positions.

Earlier, the regional currencies units continued to suffer from the risk-off environment on increased fears of a Greek debt default, with the won weakening past support level of 1,200 per dollar.

The Singapore dollar also briefly broke through a 100-week moving average of 1.3188 per US dollar. During the past two years, the city-state's currency has not closed weaker than the 100-week moving average.

The Taiwan dollar also threatened to touch the long-term technical level.

But intervention by Asian foreign exchange authorities prompted investors to add exposure in the regional units, seen as well supported.

Sustained concerns over the euro zone's crisis and a slowing global economy are expected to keep pressuring emerging Asian currencies, but some dealers see possible rebounds.

"I will not buy dollar/Asia as whole markets are long. Asian currencies look overly cooked for now," said a senior Asian bank dealer in Singapore.

Long-term investors such as central banks already have bought some emerging Asian currencies on dips.

On Tuesday, several industry sources said the Thai and Kazakh central banks had been spotted buying South Korean won bonds in recent days. They also said a bond fund run by Franklin Templeton of the US purchased a large amount of the won bonds on Friday.

The won was the worst performing emerging Asian currencies in the third quarter, tumbling 9.4 percent against the dollar, the largest quarterly loss since the third quarter of 2008 during the global financial crisis.

Emerging Asian currencies have been pressured by persistent dollar-demand in non-deliverable forwards (NDFs) from offshore institutional investors, who in recent weeks have rushed to hedge against further falls in the regional units.

Some funds built up dollar-long positions against them on deepening worries about the euro zone's sovereign crisis and a slowing global economy.

In a development intensifying euro zone concerns, Greece on Monday admitted that it will miss its fiscal deficit target this year in spite of deeper cost-cutting measures.

Worries hit shares, oil and risk currencies including the Australian dollar and Mexican peso.

The concerns keep investors stepping into risks including emerging Asian currencies yet, although they find strong support around long-term technical levels.

Technically, some of the units are still weaker than long-term support with the won and the ringgit away from 100-week moving averages.

"Longs are getting tired. But given the volatility (in the markets), I will keep the headlines and event risks in view," said a European bank dealer in Singapore.

WON

The won pared some losses as local speculators cleared dollar-long positions to stop losses on the news that other Asian central banks bought won bonds. Exporters also chased the local currency.

Foreign exchange authorities were also spotted selling dollars, especially when the won weakened past 1,200 per dollar, dealers said.

Earlier, South Korean investment trust firms, offshore funds and local interbank speculators pushed the won to as weak as 1,208.2, the softest since July last year.

The 14-day dollar/won relative strength index (RSI) rose to 73.1, indicating the pair was still in overbought territory.

But model accounts sold the won when it strengthened past 1,190 into the close.

SINGAPORE DOLLAR

The Singapore dollar rose as foreign investment banks and local interbank speculators cleared US dollar-long positions.

Agent banks of the central bank were spotted buying the Singapore dollar around 1.3200 per US dollar, dealers said.

The level was seen as strong support, as two efforts to breach in the past two days were unsuccessful.

The 14-day US dollar/Singapore dollar's RSI dipped to 72.5, but stayed above the 70 threshold, indicating the pair is still in overbought territory.

TAIWAN DOLLAR

Taiwan's central bank was spotted buying the Taiwan dollar , especially around 30.70 versus the greenback, near a 100-week moving average, while continuous stock outflows pushed the local currency to a 10-month low.

The Taiwan dollar weakened to 30.722, the softest since Dec last year and slightly stronger than the average of 30.728.

Foreign investors remained net sellers in Taiwan's stock market.

RINGGIT

The ringgit slightly rose as dealers said the central bank was spotted selling dollars around 3.2170.

That caused interbank speculators to clear dollar-long positions.

Copyright Reuters, 2011