The Singapore dollar and the South Korean won weakened on Wednesday as investors cut holdings in emerging Asian currencies on concerns over the eurozone sovereign funding before key bond sales, although inflows supported a few regional units. The Taiwan dollar and the Philippine peso bucked the overall slide, helped by stock inflows.
While inflows may be providing some relief to emerging Asian currencies early in the new year, it is premature to expect a surge of money into the region before investors see evidence that Europe's debt crisis is easing. "Solid auctions will be a positive for risk sentiment, though I think it will be hard to see 'stunning' auction results for the time being," Sacha Tihanyi, senior currency strategist for Scotia Capital in Hong Kong, adding that a significant decline in Italian bond yields would be stunning. US dollar/Singapore dollar later found more support as interbank speculators and macro names joined the bids.
Dollar/won rose as offshore funds' bids spurred local interbank speculators to cover short positions. But the pair failed to end local trade above the 1,160 level as South Korean exporters sold it on rallies for settlements and on offers from some offshore players. Standard Chartered recommended buying dollar/baht as Thailand's trade balance may deteriorate in coming months and there could be a current account deficit in 2012, compared with 2011's surplus. On Tuesday, foreign investors bought a net 10 billion Taiwan dollar ($333 million) in stocks, the largest daily purchase since December 1.