The Indian rupee is set to be this week's biggest gainer among regional peers and to enjoy its largely weekly rise since October, as a sign Europe's debt crisis may be easing lifted Asian currencies on Friday and spurred hopes for more inflows.
Emerging Asian currencies could get further support as more funds including real money investors are likely to buy them on the region's better economic and fiscal fundamentals, as well as on signs worries about a credit crunch may be easing, dealers and analysts said.
"Equities are doing well. Data in Asia will turn higher and the euro sentiment is stabilising somewhat. All that equals higher Asian currencies," said Jonathan Cavenagh, a foreign exchange strategist for Westpac in Singapore. The rupee has risen 2.5 percent against the dollar so far this week. If the gain is maintained, that would be the largest weekly rise since it strengthened 2.6 percent in the last week of October, according to Thomson Reuters data.
Saktiandi Supaat, head of FX Research at Maybank in Singapore, said gains in emerging Asian currencies might be temporary, saying he has not heard of inflows from hedge funds and real money on Friday. Dollar/won slid on stock inflows and as offshore funds and local interbank speculators cleared long positions.
Foreign investors reported net purchases in Seoul shares for a fourth consecutive session Importers bought it for settlements, especially around 1,150, but stop-loss sales pushed it down more, dealers said. Currency investors ignored the central bank's widely-expected decision to hold its key policy rate again.
Philippine interbank speculators reduced long dollar/Philippine peso positions due to improved risk appetite. Some foreign banks bought the pair on dips as it initially faced support around 43.80, dealers said. Dollar/ringgit slid, but interbank speculators covered short positions ahead of support around 3.1200, dealers said. "The break of 3.14 invited sellers to come in a try to break the 3.12 support," said a Kuala Lumpur-based dealer, adding that market players slowly turned short. Dollar/ringgit has the 50 percent Fibonacci retracement at around 3.12 of its October-December rise and also support at 3.1215, the low of December 15.