The South Korean won and the Malaysian ringgit rose against the dollar on Thursday as dealers pushed through trade-related flows and investors repatriated some cash before volumes thin even more because of holidays. Trading volumes were already relatively low in Asia because Tokyo financial markets were closed for public holiday.
Asian currencies are expected to gradually rise in 2011 thanks to the region's solid fundamentals attracting portfolio capital flows. Gains may be limited though if the eurozone fiscal crisis makes investors less willing to place money in riskier emerging markets, analysts and dealers said.
"Asian currencies will rise more next year. But speed of their gains is seen as fast as before as the euro zone's problems seemed more serious than previously thought," said Jeon Seung-ji, an analyst at Samsung Futures Inc in Seoul. The won rose 0.5 percent against the dollar as exporters' demand for settlements caused investors to clear dollar-long positions and foreign investors kept buying local stocks and bond futures.
Exporters, which have been inactive on expectations of the won's falls on growing geopolitical tensions in the peninsula, started unloading their dollar holdings, dealers said. "Importers had kept the won weaker than 1,150 earlier. But exporters' deals and the euro's slight rebound prompted investors to dump dollar positions as the military exercise went on without a conflict (with the North)," said a foreign bank dealer.
North Korea criticised major land and sea military exercises staged by the South, but stopped short of threatening a retaliatory strike as tension remained high on the divided peninsula. Foreign investors bought a net 140.9 billion won ($122.1 million) worth of stocks and a net 394.8 billion won in treasury bond futures, respectively. They purchased a net 351.7 billion in stocks on Wednesday and a combined net 1.55 trillion won in the prior two consecutive sessions.
The ringgit gained 0.5 percent against the dollar in thin trade on the back of repatriation flows and some dollar offers ahead of the Christmas and New Year holidays. But its gains were limited on importers' dollar demand for settlements. "We could see continued inflows pushing the ringgit towards 3.1000 eventually," a Kuala Lumpur-based dealer said. "Some importers note that the dollar is cheap at this level and have been buying it," the dealer added.