Investment banks from the United States and Europe bought some emerging Asian currencies on dips while some investors showed interest in the Philippine peso and the Singapore dollar, indicating players have not lost an appetite for the regional units.

Rekindled concerns over the troubled US economy and the euro zone's debt crisis are expected to prompt further profit-taking from Asian currencies, but that would not hurt the relatively brighter outlook for the units, analysts and dealers said.

"This market is ugly. There is certainly more room for correction in the near term," said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong, adding that recent gainers such as the won and the Malaysian ringgit can be at risk.

"I am still bullish Asia relative to the USD, EUR and GBP considering the fundamentals. As such it will eventually provide a value opportunity."

Emerging Asian currencies have enjoyed inflows to the region which has better economic fundamentals than developed markets and where policymakers are still fighting inflation.

But their gains can be reduced whenever fears over fiscal problems in the euro zone and a global economic slowdown sour risk sentiment.

Worries about a possible US debt default eased with the last minute deal in Washington, but investors moved the focus to how a tighter fiscal policy could constrict US growth.

Still, investors maintained their bets on Asian currencies.

"Asia is the new 'risk off' trade," Deutsche Bank said in a note. "While weaker growth in the US would eventually drag Asian external demand lower, it will also magnify the pull of the latter's safe haven characteristics."

WON

Offshore players such as hedge funds and interbank speculators covered dollar-short positions, sending the won to its weakest in more than two weeks, while global risk aversion hit Seoul shares.

Foreign investors also made their biggest daily stock sales since May, putting more pressure on the South Korean currency.

The won ended local trade down 0.9 percent at 1,060.4 per dollar, slightly firmer than the session's low of 1,060.5, the weakest since July 19.

It is seen having a room to weaken more, probably to 1,061.4, the 23.6 percent Fibonacci retracement level of its strengthening between May and July.

RINGGIT

The ringgit weakened to as soft as 2.9820 per dollar, the weakest since July 22, as model funds covered dollar-short positions.

But the Malaysian currency recovered some falls as the euro strengthened to 1.42 versus the greenback.

SINGAPORE DOLLAR

The Singapore dollar also suffered from US dollar-short covering, then clawed back some of the slip.

Earlier, Deutsche Bank recommended buying the city-state's currency against the dollar with a target break of 1.18 and receiving Singapore dollar two-year/five-year interest rate swap with a target break of 70 basis points.

"Singapore... is liquid and accessible -- hence its new lead status (along with JPY and AUD) as the safe haven destination for global capital," Deutsche said in a note.

The capital flows are driving curves to "bull flatten" -- where long-term rates fall faster than short-term rates -- across the region and Singapore stands out as still having one of the steepest curves in the region, allowing it to expect duration extension of the real money flows to drive the curve there a lot flatter, it added.

PHILIPPINE PESO

The Philippine peso gapped down against the dollar on foreign banks' offers amid global growth worries.

But local names bought the peso on dips, especially around the session's low of 42.41 per dollar, dealers said.

The level is the 38.2 percent Fibonacci retracement level of its gains between July-August.

"It is possible that we could see a dip to fill in the gap," said a European bank dealer in Manila, adding players appear to hold long dollar positions to clear.

Copyright Reuters, 2011