Emerging Asian currencies fell on Friday, with most of them poised for a weekly loss, as short-term investors continued to cut their bets on riskier assets ahead of a European Union summit where divided leaders will try to forge a solution to the bloc's debt crisis.
The baht underperformed most of its Asian peers, breaking through a technical support level, as investors look for chances to sell the Thai currency on increasing worries about widespread flooding that is threatening economic growth. The eurozone's leaders said they did not expect Sunday's meeting to provide a cure-all for the continent's debt crisis, with major powers France and Germany still sharply divided over how to strengthen a eurozone rescue fund.
France and Germany said the summit will discuss a comprehensive plan, but no decisions would be adopted before another meeting to be held by Wednesday at the latest. Speculators and offshore hedge funds continued to reduce positions in riskier assets, leaving market positions of short-term investors slightly long dollar against Asian currencies, dealers and analysts said.
But gains in Asian currencies lost steam this week on increasing doubts over the whether the EU can cobble together a detailed plan and quickly implement it. The baht, the second worst performer in Asia, has slid 1 percent versus the greenback. But the South Korean won resisted the trend, rising 0.8 percent against the dollar due to exporters' demand and as some offshore investors were seen re-hedging their bets against the won's weakness.
The Commerce Ministry on Friday forecast a 13 percent drop in exports in the fourth quarter from a year earlier as flooding disrupted operations at many businesses. The pair rose above 31.05, the 61.8 percent Fibonacci retracement of its falls from 31.36 to 30.55 earlier this month.
If the retracement is clearly broken, dollar/baht is seen having room to head to 31.170, the 76.4% retracement. The Singapore dollar has fallen 0.5 percent against the US dollar so far this week, according to Thomson Reuters' calculation based on the central bank's data. Dollar/ringgit jumped to 3.1600 on short squeezes although leveraged accounts and speculators sold the pair around the level.