SEOUL: The Singapore dollar led a rebound among some emerging Asian currencies on Tuesday with the euro recovering some losses but worries about rising Spain's borrowing costs cast doubt over sustainability of regional units' strength.
Many emerging Asian currencies initially fell as Spain's bond yields jumped to euro-era highs and higher Italian borrowing costs rekindled market concerns over the euro zone's debt crisis.
On Monday, Spain's bond yields rose to 7.3 percent, undermining the country's ability to finance itself, less than two weeks after the euro zone decided to lend Madrid 100 billion euro ($125.80 billion) to help its ailing banks. Italy's 10-year bond yields also rose above 6 percent.
That came less than a day after investors cheered a marginal victory of pro-bailout parties in Sunday's Greek elections, which supported most emerging Asian currencies on Monday.
Madrid is likely to pay record high borrowing rates at debt auctions this week. The country's Treasury will issue 2 billion to 3 billion euros of 12- and 18-month debt on Tuesday and between 1 billion and 2 billion euros of bonds due in 2014, 2015 and 2017 on Thursday.
"Investors remain cautious, and the tone is to sell on rallies. Europe keeps disappointing, and any piece of good news is only having a short-lived impact," said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong, adding emerging Asian currencies are expected to stay weaker.
The Indian rupee is seen more vulnerable after the central bank kept interest rates steady on Monday, confounding market expectations for stimulus, Cheung said.
The rupee weakened past 56.00 per dollar earlier and is seen heading to record low of 56.52 hit on May 31 if the global risk aversion deepens, while investors are keeping an eye on possible intervention to support the currency by the Reserve bank of India, dealers said.
SINGAPORE DOLLAR
US dollar/Singapore dollar slid on a rebound in the euro above 1.2600, while overall liquidity was thin.
Investors are likely to stay on the sideline, waiting for the result of a policy meeting of the US Federal Reserve on Wednesday.
WON
Dollar/won started local trade higher on rising Spain's borrowing costs, but turned lower on exporters' dollar sales for settlements.
Some offshore players sold the pair, pushing it down, dealers said.
BAHT
Dollar/baht slid on selling from offshore funds and gold investors, dealers said.
But onshore interbank players bought the pair below 31.40 with importers' bids and sustained concerns over the euro zone.
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