The South Korean won and the Philippine peso surrendered some of their recent gains on Wednesday as global investors rushed to take profits from recent rallies in riskier assets and covered yen-short positions against emerging Asian currencies. The regional units may see a further correction in the near-term if Japan's nuclear crisis heightens risk aversion, although their mid-term bullish trend remains intact, analysts and dealers said.
Despite worries about Japan, emerging Asian currencies had enjoyed solid gains, especially since co-ordinated yen-selling intervention by the Group of Seven in the day after the quake helped bring some stability back to regional stocks and bonds. The won slid as much as 0.9 percent against the dollar, hit by dollar-short coverings among offshore players such as model funds and as foreign investors turned to net sellers in the local stock markets.
The South Korean currency also lost against the yen as investors covered yen-short positions amid a broad strength in the Japanese currency. The won could not recover much of its earlier losses although exporters including shipbuilders did not miss chances to buy in on dips for settlements, especially when the won stayed weaker than 1,092 per dollar.
"We saw a short-term peak last weak. It will be a key if the won strengthens past the mid-1,090, given its recent quick rise," said a local bank dealer in Seoul. If investors cover dollar-short positions more, the won may head to 1,102, the level which the country's foreign exchange authorities had defended.
Currency investors showed little reaction to the central bank's decision to leave interest rates unchanged, while signalling that further rises would likely be needed to contain rising inflation. The decision was widely expected. The baht lost up to 0.9 percent against the dollar as foreign bank rushed to cover dollar-short positions, especially before local holidays.
The recent intervention by the central bank also prompted players to cover their short positions. If the Thai currency weakens past 30.24 per dollar, the higher downtrend channel line, it has room to fall to 30.37, a 100-day moving average. The peso also suffered from dollar-short covering and weakened past 43.30 per dollar, a key support level and the 61.8 percent Fibonacci retracement level of its November-January weakening trend.
February's trade data also put pressure on the peso, with export growth at its weakest since November 2009. But the Philippine currency found support from macro accounts' demand at 43.35, its daily low. The Singapore dollar fell as short-term speculators and leveraged names covered US dollar-short positions. But the city-state currency recovered some of its losses as the Monetary Authority of Singapore (MAS) is expected to tighten policy further to fight inflation on Thursday.