Most emerging Asian currencies gained on Friday on strong US and German data, with the Thai baht set to enjoy its best week in nearly one month thanks to inflows including Japanese flood insurance payouts. Investors took some profits from the regional units before the weekend, but the unit were likely to stay firm next week despite sustained concerns over rising oil prices, dealers and analysts said.
"I am positive on risk until early next week," said a senior European bank dealer in Singapore, adding he was most positive about the South Korean won and the Singapore dollar. Emerging currencies were aided this week by China's central bank decision last weekend to pump up liquidity to boost growth, and by the eurozone finance ministers' approval of a second bailout fund for Greece.
The regional units also gained against the yen, with the baht reaching its strongest level since August as the Japanese currency stayed under pressure following the Bank of Japan's surprise policy easing on February 14. The regional units experienced some correction because of higher oil prices amid escalating tension over Iran's nuclear programme, which could further dent the fragile European economy. Among the weekly winners, the baht has risen 1.4 percent against the dollar, according to Thomson Reuters data. If the Thai unit maintains the gain, that would be the largest weekly rise since the week ended on January 29, the data showed.
Westpac said in a note that the Indian rupee and Indonesian rupiah are most vulnerable among regional currencies to higher oil prices. Dollar/baht recovered most of its initial losses as investors covered short positions amid caution over possible intervention by the central bank.
Bank of Thailand Deputy Governor Suchada Kirakul said the currency has risen quickly recently and the central bank is monitoring fund inflows, especially those into the bond market. Earlier, the pair slid on expectation of inflows linked to Japanese insurance claims, but found support at 30.20, the 76.4 percent Fibonacci retracement of its July-January rises. Some hedging flows put pressure on the pair, while insurance flows have not been seen yet, dealers said.
Dollar/won was confined in a tight range after gapping lower as South Korean exporters and importers engaged in a battle around mid-1,120, dealers said. The pair moved between 1,124.0 and 1,125.9 during the local trade after opening at 1,124.3. "Both bids and offers from corporates are pretty strong and there is no room for interbank players to move. The euro holds a key, but I don't think dollar/won can break through support at 1,120, even though the euro rises further," said a senior foreign bank dealer in Seoul.
Dollar/Philippine peso slid on a firm euro, while its slide was limited as some speculators covered short positions before the weekend, dealers said. But a European bank dealer in Manila expects the pair to fall next week, probably to 42.40 eventually.