SINGAPORE: The Singapore dollar and the Philippine peso led a rebound among emerging Asian currencies on Monday after a poll showed pro-austerity conservatives in Greece were leading ahead of next month's election, but the outlook remained fragile.
Short-term investors covered short positions in emerging Asian currencies built up over the past few weeks when worries over a messy Greek exit from the euro zone had curbed appetite for risky assets.
The outcome of the poll spurred short-covering in other risky currencies such as the euro and the Australian dollar as a lead for the conservatives would allow the formation of a government committed to keeping the country in the euro zone.
The Indonesian rupiah was a lone underperformer with its indicative prices falling 1.3 percent even though the central bank said it was assessing policy options to manage rupiah and dollar liquidity. Bank Indonesia was also spotted selling dollars, dealers said.
Selling of Indonesian stocks, bonds and the rupiah has intensified in recent weeks on fear of fund outflows from the country amid policy uncertainty and global risk aversion. Af ter the Indian rupee, the rupiah is the second-worst performer among emerging Asian currencies.
"The key is BI (Bank Indonesia) needs to make sure that there is enough dollar liquidity onshore, if that is done, the dollar/rupiah pairing in spot can be calmed, otherwise it's going to be very painful for markets and authorities alike," said Suresh Kumar Ramanathan, regional rates and foreign exchange strategist at CIMB Investment Bank in Kuala Lumpur.
The rupiah's weakness came as investors were already doubting how much further emerging Asian currencies could gain as euro zone worries such as the health of Spanish banks persisted. The global economic picture also remained a worry.
The premium investors require to hold Spanish government bonds over their German counterparts surged on Monday to the highest since the euro was launched, as the state's takeover of Bankia fueled concerns over the rising costs for Spain of helping its banks.
"We can see more of a short squeeze (in emerging Asian currencies) but I would sell into that squeeze," said Jonathan Cavenagh, a senior FX strategist at Westpac in Singapore.
"We can see further capital outflows from the region on European uncertainty and China slowdown fears, etc," Cavenagh said.
Emerging Asian currencies reported multiple weekly losses with the Indian rupee sliding for an eighth week.
RUPIAH
Dollar/rupiah's indicative prices rose to 9,400, but the pair was traded at 9,550 earlier, according to a Jakarta-based dealer.
The central bank provided dollars at 9,550 and 9,400, respectively, dealers said. Bank Indonesia officials could not be immediately reached for comments.
Some other players also sold the pair amid rebound in other Asian currencies, but market players stayed worried about more outflows from the country.
Dollar/rupiah's one-month non-deliverable forwards eased with one-month offshore/onshore forward spread narrowing.
SINGAPORE DOLLAR
US dollar/Singapore dollar slid 0.6 percent to 1.2738 on selling from short-term players and leveraged accounts.
The pair is supported around 1.2720-1.2730, given its May 24 low at 1.2723.
It also has the tenkan line on the daily Ichimoku chart at 1.2718.
US dollar/Singapore dollar has been closing above the line since early May.
PHILIPPINE PESO
Dollar/Philippine peso fell 0.7 percent to 43.47 as interbank speculators reduced long positions and on selling from fast money.
Some market players continued to hold long positions awaiting the outcome of the Greek elections on June 17, a European bank dealer said, adding that they may cut positions if the conservatives who support the bailout keep their lead.
"USD might even reverse its upward trend nearing the elections if they (conservatives) continue to gain and lead," said the dealer, adding he would sell the pair on rallies at least during the current session.
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