The Singapore dollar and the Taiwan dollar rose on Wednesday, led by hopes for more inflows, and some other emerging Asian currencies strengthened, although the outlook for regional units stayed dim on renewed worries about global growth and Europe. The won remained under pressure on sustained geopolitical tensions on the Korean peninsula over the North's plan to launch a rocket.
Spanish bond yields jumped to 6 percent, while German bund yields were the lowest in history on Tuesday as doubts over global growth increased worries about the fragility of peripheral eurozone economies. The Asian Development Bank said emerging Asian economies were set to cool this year before rebounding in 2013.
Emerging Asian currencies have slid this week after weaker-than-expected data from the world's two biggest economies - the United States and China. Earlier, sources said the Bank of Japan will consider easing monetary policy at its next rate meeting on April 27 by boosting government bond purchases under its asset-buying programme.
Emerging Asian currencies had benefited from the BoJ's surprising stimulus in February as it prompted investors to buy the higher-yielding units with the cheap yen. US dollar/Singapore dollar started the day higher on global risk-off sentiment but turned lower on continued selling from speculators and leveraged names.
The MAS is widely expected to keep monetary policy on hold and allow the local dollar to rise at a "modest and gradual" pace against other currencies to help combat persistent inflationary pressures. Commonwealth Bank of Australia (CBA) recommended a long Singapore dollar trade versus a weighted yen/euro/US dollar/British pound basket through six month forwards to hedge a possibly more hawkish tone from MAS.
CBA expects the MAS to keep its current stance and policy slope this week, but it says continued elevation in both headline and core inflation points to gains in the Singapore dollar nominal effective exchange rate (NEER) in coming months. US dollar/Taiwan dollar dipped on foreign inflows despite global risk-off sentiment, while trading was very thin. Traders also saw foreign investors' outflows and Taiwanese importers bought the pair. One-month dollar/won non-deliverable forwards (NDFs) in offshore markets hovered around a three-month high as North Korea rejected international protests over its planned long-range rocket launch.
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