Most emerging Asian currencies slid on Thursday after weak factory activity in China but largely recovered as investors bought them on views that a hard landing for the world's No 2 economy was unlikely. China's industrial activity shrank in March for the fifth consecutive month, with the overall rate of contraction deepening and new orders sinking to a four-month low, the HSBC flash purchasing managers index (PMI) showed.
"The bad China data spurred short-covering in dollar/Asia. But with the short-covering, we got more bullets to sell (dollars) now," said a senior dealer at a Malaysian bank in Kuala Lumpur. OCBC Bank's foreign exchange strategist in Singapore, Emmanuel Ng, said his bank was growing increasingly cautious on emerging Asian currencies due to sluggish economic conditions and inflation, as well as slowing portfolio inflows.
OCBC is long US dollar/Singapore dollar from 1.2638 with a target of 1.2855, he said. Meanwhile, Standard Chartered recommended raising currency hedge ratios on Asian stocks due to increasing economic uncertainty and slowing stock inflows. Dollar/won turned slightly lower after it failed to rise above its previous high.
The pair ended local trade at 1,129.4. Earlier, it rose to as high as 1,132.5, the session high on March 15, breaking through a 55-day moving average at 1,130.3, after the weak HSBC China PMI number. The dollar/won had been staying lower than the average since late January. But some offshore players and South Korean exporters sold the pair above 1,130, prompting stop-loss dollar sales, dealers said.
To rise further, dollar/won appears to need a clear break of 1,132.5, the high of its recent range. Once that level is cleared, it may head to 1,135.0, a 100-day moving average, and 1,139.1, the 50 percent Fibonacci retracement of its January-March slide.
US dollar/Singapore dollar came off an early high at 1.2655 and fell to 1.2610 on selling pressure across the board after a strong yuan fix. US dollar/Taiwan dollar edged down on small stock inflows as the local equity market remained firm. Foreign investors bought a net 6.49 billion Taiwan dollar ($219.55 million) of the island's stocks.