Profit-taking weighs on Asia FX due to Greek worries

SINGAPORE: The South Korean won and the Singapore dollar slipped on Monday as short-term investors booked profits from emerging Asian currencies and reduced long positions on concerns over a lack of progress in Greek debt restructuring talks.

Coalition parties in Athens must tell the European Union by Monday whether they will accept the painful terms of a new bailout deal worth 130 billion euros in order to avoid a disorderly default.

Surprisingly robust US job data supported Asian stocks, but currency investors focused more on the talks about the Greece debt problems, as failure to conclude a deal will hurt the appetite for risk assets, analysts and dealers said.

"Today's corrections (in emerging Asian currencies) are a reflection of the Greece issue still playing a big role in FX markets," said Saktiandi Supaat, head of FX Research at Maybank in Singapore.

He said emerging Asian currencies were like a rubber band that "has not reached full tightness towards upside, but if Greece falters, the band may snap back down."

Most regional units have risen so far this year thanks to inflows to the region amid high liquidity and some signs that the euro zone debt crisis was easing.

Investors grew more optimistic on emerging Asian currencies in the past two weeks, but some of them are already seen as excessively bought and vulnerable to short-term corrections.

The 14-day Relative Strength Index of dollar/rupee, dollar/ringgit and US dollar/Taiwan dollar stayed below the 30 threshold, indicating those pairs are still in an oversold territory.

Short-term players booked profits from the currencies to square long positions in emerging Asian currencies.

WON

Dollar/won started local trade at a near three-month low of 1,114.8, but quickly turned higher.

Custodian banks bought the pair with some of them suspected of bidding it for Lone Star's sale of a stake in Korea Exchange Bank to Hana Financial Group.

Local interbank speculators covered short positions on caution over potential dollar-bidding by South Korean foreign exchange authorities.

State-run importers also bought the pair for settlements, while the authorities were not spotted buying dollars, dealers said.

"Support around 1,110 would be stronger on mixed sentiment toward the euro zone, although dollar/won is seen staying under pressure. So, it would move around 1,120 for the time being," said a local bank dealer in Seoul.

The pair has a 200-day moving average at 1,109.5.

SINGAPORE DOLLAR

US dollar/Singapore dollar rose on short-covering as investors were wary of intervention.

Some investors showed selling interest above 1.2450, but the pair rose above the level on a weaker euro.

RUPIAH

Dollar/rupiah gained on sustained demand from local investors amid higher US dollar/ Singapore dollar.

The pair may rise above 9,000 again on renewed worries about the euro zone.

PHILIPPINE PESO

Dollar/Philippine peso dipped despite short-covering.

Still, some interbank players were looking to buy the pair on dips, saying the market remained short dollars.

"Better-than-expected US jobs data failed to boost risk appetite," said a European bank dealer in Manila, seeing the pair heading to 42.80.