Won slides on North Korea worries

The won led slides in most Asian currencies on Monday, hitting a two-month low on geopolitical tension in the Korean peninsula, with traders predicting further weakness for the South Korean currency as it cleared more support levels. Importers and custodians chased dollars against the won, while exporters were also absent from their regular month-end bids for the local unit, dealers said.
Offshore investors covered short-dollar positions versus the won as the breach of technical support lines triggered selling by model funds. "The won came more pressure as rhetoric on North Korea was getting tougher when dollar bids from importers were strong," said Jeong My-young, a senior currency strategist at Samsung Futures in Seoul.
The won slid to the day's low of 1,141.8 per dollar, its weakest since January 18, and ended local trade at 1,141.6, weakening past support at 1,140, the 38.2 percent Fibonacci retracement of its December-March appreciation. It is seen heading to 1,145.5 per dollar, the 61.8 percent Fibonacci retracement of its January-March appreciation, as it also cleared 1,139.1, the 50 percent retracement of the move.
The won's weakness added to worries in its other regional peers, whose outlook darkened on worries over a slowing global economy, especially the Chinese market, and on a firmer dollar. But some dealers doubt how much further the won would fall on the geopolitical tension, given possibilities of dollar-selling intervention by the foreign exchange authorities.
In the past, the authorities had supported the local currency when it was hit by such tension, according to dealers and analysts. Exporters are also unlikely to keep missing chances to buy the won on dips, they said. The 14-day dollar/won relative strength index (RSI) rose to 64.9, near the 70-threshold, indicating the pair is approaching overbought territory.
US dollar/Singapore dollar rose after data showed Singapore's industrial output rose smaller-than-expected. The pair started the day lower, but some investment houses bought it around its 200-day moving average, which currently stands at 1.2580. Dollar/ringgit slid as interbank speculators cut positions. But the pair recovered all of the slides on short-covering with support near the bottom of the daily Ichimoku cloud around 3.0550. It turned slightly higher in the afternoon on a weaker euro.
Meanwhile, Barclays Capital recommended buying spot ringgit/Taiwan dollar with a target of 9.80, saying Malaysia will benefit from higher energy prices. "In addition to the beneficial impact of oil for the MYR versus the TWD, MYR's higher carry would also support it in the more benign environment where risk appetite is high and worries about future supply remain," BarCap said in a note. Ringgit/Taiwan dollar rose 0.1 percent to 9.6130. Dollar/baht started the day lower, but the pair found support from Thai importers. Thailand's finance minister also said he would like to see a weaker baht to help small businesses.