SINGAPORE: Most emerging Asian currencies held firm on Tuesday, as investors' appetite for riskier assets improved on hopes that China and the United States will take stimulus steps and Europe will make further moves to tackle its debt crisis.
Demand from offshore funds pushed the Malaysian ringgit close to its strongest level in three months, while the Singapore dollar found support from hedge funds. Interbank speculators lifted the South Korean won.
But regional units gave up most of initial gains as investors booked profits amid caution over possible intervention by central banks guarding against excessive appreciation.
Singapore's central bank was spotted buying the greenback to prevent the Singapore dollar from strengthening above the 1.2400 per dollar level, dealers said.
"I don't mind taking some profits (from emerging Asian currencies) here and I will wait for better levels. Europe is still facing uncertainties over using bailout funds to buy bonds," said a senior Malaysian bank dealer in Kuala Lumpur.
Last week, the European Central Bank said it may again start purchasing government bonds to lower crippling borrowing costs of indebted euro zone members such as Spain and Italy. Hopes that the ECB will act has helped yields in Spain and Italy to inch lower.
Still, investors hesitated to add bullish bets on emerging Asian currencies before China reports a slew of economic data on Thursday.
Data covering industrial production, retail sales and inflation are due to be released and should give some insight into whether the world's No.2 economy can pick up growth momentum in the second half.
Emerging Asian currencies barely moved after Australia's central bank kept its main cash rate at 3.5 percent for a second month as expected.
RINGGIT
The ringgit earlier firmed 0.2 percent to 3.0990 versus the greenback, its strongest since May 16, as leveraged names and model funds bought it,
But the ringgit gave up most of the gains as Malaysian traders booked profits, seeing psychological resistance to the ringgit firming below 3.1000 per dollar. The 14-day dollar/ringgit relative strength index (RSI) stood on the verge of breaking below the 30 threshold which indicates the dollar is oversold.
Meanwhile, Credit Agricole CIB recommended buying six-month ringgit non-deliverable forwards and selling the Singapore dollar spot.
The Singapore dollar is seen overvalued, while the ringgit is relatively cheap, Credit Agricole said in a note.
"Quantitative model of SGD/MYR highlights sharp downside risks to the currency pair based on oil prices, relative equity performance, interest rate differentials and risk aversion," it said in a note.
Late last month, the Singapore dollar hit a 14-year high against the ringgit.
WON
The won gained on demand from interbank speculators, but the short-term investors were reluctant to buy won below around the 1,125 per dollar level and booked profits.
On Monday, the South Korean currency had hit 1,124.0 to the greenback, its strongest since April 3, before giving up most of its gains.
SINGAPORE DOLLAR
The Singapore dollar tried to strengthen past 1.2400 per US dollar on demand from hedge funds and leveraged accounts, before the central bank was seen stepping in.
The 14-day US dollar/Singapore dollar RSI stood at 32.1, a notch higher than the 30 threshold.
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