SINGAPORE: Emerging Asian currencies rose slightly on Wednesday on short-covering after European officials agreed to strengthen a bailout fund, but most regional units lost ground during November.
The won found support from a central bank in central Asia, which dealers said had sold about $700 million in dollar/won on Tuesday to buy South Korean bonds. Some Asian central banks have bought bonds in Korea to diversify their foreign exchange reserves.
Euro zone officials agreed on Tuesday on two ways to leverage the firepower of their bailout fund, the 440-billion-euro European Financial Stability Facility (EFSF), using both an insurance scheme and a co-investment programme. They also agreed to extend further aid payments to Greece and Ireland.
Hopes rose for more involvement from the International Monetary Fund (IMF) after Eurogroup President Jean-Claude Juncker said there was agreement to rapidly explore ways of boosting the IMF's resources through bilateral loans so it can match the leveraged EFSF's capabilities.
However, many investors looked to take profits from gains in emerging Asian currencies rather than to add more bets, due to persistent scepticism about the euro zone's efforts. The caution put pressure on Asian stocks.
"People are reducing long dollar/Asian currencies as they sense something is cooking in the euro zone," said a senior Asian bank dealer in Kuala Lumpur.
"But the market has not gone short yet because once the euro breaks 1.3200, hell will break loose," he added.
The euro, as of 0708 GMT, edged down 0.1 percent to $1.3300 for the day.
Most emerging Asian currencies have fallen against the dollar this month, although they found relief from short-covering this week on hopes of progress in tackling the euro zone debt crisis.
The Indian rupee , which last week hit a record low, has been the worst performer among the regional currencies. It has lost 6.7 percent against the dollar in November, according to Thomson Reuters data.
If the currency maintains the loss or falls more, that would be its biggest monthly fall in at least 16 years.
The Indonesian rupiah has shed 3.3 percent versus the dollar this month, Thomson Reuters data showed, although dealers said the central bank has been intervening by selling dollars.
Earlier, Bank Indonesia's governor said the central bank plans to intervene more heavily in the currency market and dealers spotted its dollar-selling.
Emerging Asian currencies are expected to stay weak next month, dealers and analysts said.
"The EU agreement is definitely a welcome development in terms of EUR. However, it will be unable to lift general sentiment. I would think the minor risk-on sessions present better entries to short Asia ex-Japan currencies in the short-term," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.
"We will have the usual USD strength in December. European bank recapitalization is likely to take two quarters judging by the experience in the last global crisis. While EUR/USD might get stuck in the range on these offsetting forces, these developments are certainly negative for Asia ex-Japan currencies."
WON
Dollar/won eased on supplies from custodian banks and South Korean exporters for month-end settlements.
But the pair recovered most of its earlier slide as importers and some offshore funds bought it, prompting speculators to cover short positions.
Investors were keeping an eye on flows linked to a sale of a stake in Kumho Petrochemical Co.
IFR reported on Tuesday an undisclosed vendor has launched a block trade in Kumho to raise up to 418 billion won ($362.1 million).
An official at a bookrunner said foreign investors were estimated to have taken around half of the stake, which currency dealers say may result in dollar offers of about $200 million.
RINGGIT
Macro names and interbank speculators sold dollar/ringgit , but some players covered short positions with support seen at 3.1600.
In the past, when the pair rose above that level, the dollar strengthened further.
A Kuala Lumpur-based dealer said market players are reluctant to sell the pair more, given persistent worries about the euro zone.
SINGAPORE DOLLAR
US dollar/Singapore dollar eased on selling from macro accounts and interbank speculators but recovered most of the slide.
Investors covered short positions as the pair is seen facing support around 1.2900.
BAHT
Dollar/baht fell on offshore banks' selling but its slide was limited, tracking other dollar/Asian currencies.
The Bank of Thailand, as many expected, slashed interest rate by 25 basis points (bps) to cope with the floods and said it would ease policy again if the economy does not recover.
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