Singapore dollar, ringgit break support, Greece hits Asian FX

SINGAPORE: Emerging Asian currencies fell on Thursday with the Singapore dollar and the Malaysian ringgit breaching support lines, as investors cut risk exposure on fear over the European debt crisis and expect further falls in the regional units.

Fast money accounts and interbank speculators sold the Singapore dollar, while the ringgit and the South Korean won came under pressure from dollar demand linked to dividend payments to foreign investors, dealers said.

France and German warned Greece that it will not receive any aid, which the debt-ridden country desperately needs to avoid a default, until Athens decides whether it wants to stay in the euro zone.

The uncertainty dented hopes for more progress to ease European debt problems at a Group of 20 summit starting later in the day and raised concerns over a disorderly default by Greece, which could affect European banks and the global financial system.

"It is very hard to have any hope (from the G20 summit) after Greece threw everything out of the window and the EU leadership was angry at Greece," said a senior Asian bank dealer in Kuala Lumpur.

The dealer said he would add dollar positions against emerging Asian currencies on dips.

The regional units fell this week after Greek Prime Minister George Papandreou on Monday surprised global financial markets by calling for a referendum on the 130 billion euro bailout package that euro zone leaders endorsed last week.

"The current levels to buy dollar/Asian currencies are very high and risk reward is certainly to be on short side. But you can't fight the momentum," said a European bank dealer in Seoul.

Asian currencies did not find much support much even after the Federal Reserve said on Wednesday it was mulling more stimulus while a draft G20 communiqu? toughened language on foreign exchange rate flexibility that generally is aimed at China's rigid currency regime.

If the draft is passed by the leaders, that will signal a shift in China's stand on past occasions to resist any oblique reference to the yuan.

The markets may react by pushing the dollar/Asian currency non-deliverable forwards (NDFs) lower, which in turn would lend indirect support for emerging Asian currencies.

Some investors are looking for chances to buy the regional units.

"Despite worries about Greece, I may sell dollar/Asia. The concerns have been fully priced in the market," said a Singaporean bank dealer.

SINGAPORE DOLLAR

US dollar/Singapore dollar rose above 1.2793, the 50 percent Fibonacci retracement of its declines in October.

The pair is seen having room to rise more, probably to the 61.8 percent retracement at 1.2889, given the risk-off environment.

RINGGIT

Dollar/ringgit rose above the 61.8 percent retracement at 3.1473 of its October slides on dividend payment-linked demand.

If the pair ends the day above the line, it may head to 3.1724, the 76.4 percent retracement.

WON

Dollar/won rose on offshore funds' demand and short-covering by local interbank speculators.

The pair found more support from demand related to corporate dividend payments to foreign investors.

Dealers in Seoul estimated the dividend-linked dollar/won demand at about $300 million during the day.

They also say immediate demand related to dividend payments to foreign investors appeared to have been satisfied.

"I had some hopes from the G20 summit, but Greece dampened the hope by calling a referendum," said a senior foreign bank dealer in Seoul.

Copyright Reuters, 2011