SINGAPORE: Most emerging Asian currencies rose slightly on Tuesday after euro zone policymakers reached a deal on a Greek rescue fund, while some investors took profits on the belief the accord had already been largely factored in.
Euro zone finance ministers approved a second bailout programme for Greece that includes new financing of 130 billion euros ($172.47 billion) and aims to cut Greece's debt to 121 percent of GDP by 2020. That pushed up the euro to near $1.33.
Despite the agreement, currency players did not chase emerging Asian currencies. Regional stocks failed to rise amid concerns the deal is just a short-term fix.
"I am more inclined to think of a consolidation or slight corrections for Asian currencies after recent rallies. Too much optimism has been priced in already," said Frances Cheung, senior strategist for Credit Agricole CIB in Hong Kong.
The Indian rupee and the Singapore dollar may be most vulnerable to the corrections, given India's current account deficits and low yields of Singapore bonds, Cheung said.
The yield for two-year Singapore government bonds stood at 0.302 percent, while the yield for two-year South Korean government bonds was at 3.460 percent.
Still, the corrections should not upset a bullish trend among emerging Asian currencies as the region may benefit from sustained fund inflows, dealers and analysts said.
"It is hard to find somewhere else to invest money amid ample liquidity except Asia. So, they (Asian currencies) will gradually strengthen," said a Singapore bank dealer.
Credit Agricole's Cheung said some currencies such as the won and rupiah may find support from bond inflows.
"The coming weeks brought heavy maturing European debts, so Asian bonds could potentially benefit from diversification if those European bonds are not rolled over," Cheung said.
RINGGIT
Dollar/ringgit slid on the Greece deal, while its downside was limited as investors covered short positions.
The pair also has support at 2.9950, the low of Feb 8.
A Kuala Lumpur-based dealer said he would sell dollar/ringgit only on rallies, especially above 3.0250, even if he expects the pair to fall further.
WON
Dollar/won turned lower as foreign investors continued to buy Seoul stocks and on stop-loss dollar sales.
But its slide was strictly limited on importers' demand and short-covering.
South Korea reported a trade deficit of $3.86 billion for the year to Feb 20, data showed.
"Everything in dollar/won is up to how liquidity boosted in financial markets can offset slowing exports," said a foreign bank dealer in Seoul.
"The pair may head to 1,110 on risk sentiment. But I will build up long positions for $100 million around there to carry as I doubt how much more offshore funds will sell dollars, given their recent offers."
SINGAPORE DOLLAR
US dollar/Singapore dollar edged up on short-covering.
The pair turned lower with the Greece deal boosting the euro, but investors continued to cover short positions as the agreement has been priced in.
Comments
Comments are closed for this article.