Asian currencies gained a bit of reprieve after dipping earlier this week on renewed jitters over the euro zone's sovereign debt crisis.

Concerns that Asian economies may increasingly feel the pinch from a slowdown in developed economies have also weighed on emerging Asian currencies.

Still, their drop over the past couple of sessions has proved to be mild, and their moves over the past week have been relatively stable.

"Asian currencies across the board have held in very well despite the sell-off in euro/dollar and the basic DXY rally," said Stuart Oakley, head of emerging markets FX Asia for the Royal Bank of Scotland in Singapore, referring to the dollar's recent rally against a basket of currencies.

For example, although the euro has dropped from around $1.45 to $1.40 in the past week, the South Korean won's level against the dollar is basically steady from a week ago, Oakley said, adding that he expected the firmness in Asian currencies to persist.

"I think the market is starting to view Asian policymakers, particularly central banks, with a lot more credibility. They're very consistent in their policy of guiding their currencies gradually stronger and fighting inflation," he said.

In addition, speculative long positions in Asian currencies are not as large now as they were in the past, Oakley said, adding: "So there is not many speculative positions that are being caught off-side and are going to be closed out."

Some market players, however, reckon that emerging Asian currencies may have room to weaken in the near-term.

"We are far from being out of the woods as of yet," said Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong.

"I think financial market volatility remaining elevated, combined with the less robust growth outlook, means that Asian central banks may accommodate some weakness in their currencies as a shock absorber until matters settle," Tihanyi said.

WON

The dollar retreated against the won, with one dealer saying that the greenback slipped as dollar selling by South Korean exporters offset dollar buying by oil importers.

While some South Korean exporters are waiting for a further rebound in the dollar before selling, some exporters seem to think that the current dollar/won level near 1,070 is not a bad level to sell.

RUPIAH

The rupiah underperformed against other emerging Asian currencies, with a trader for a European bank in Jakarta citing dollar-buying by overseas investors repatriating proceeds from maturing SBI, or short-term debt issued by Indonesia's central bank.

Some investors, however, used the proceeds to buy longer-term debt, helping spark a rally at the long end of the yield curve including 20-year government debt, the dealer said.

The 20-year Indonesian government bond yield slid roughly 10 basis points on the day to around 7.65 percent, the dealer said. Twenty-year Indonesian government bond yields have slid nearly 150 basis points since the end of 2010.

Copyright Reuters, 2011