SINGAPORE: Most emerging Asian currencies edged down on Thursday, pressured by sustained worries over the euro zone debt crisis as investors keep a nervous eye on a Spanish bond sale, while the won recovered most early losses on suspected intervention.
Regional units found some relief from hopes of near-term policy easing by China, but investors remained cautious before Spain's auction of two- and ten-year bonds later in the day, seen as a key test of investor risk appetite.
The debt-ridden country's ten-year government bond yield jumped above 6 percent earlier this week, fuelling concern that it would be unable to manage its public financing and would have to seek an international bailout.
Emerging Asian currencies are likely to stay under pressure unless the bonds see strong demand, dealers and analysts said.
"The probability of weak demand is high and concern over Spain is building," said Saktiandi Supaat, head of FX Research at Maybank in Singapore.
The potential for a sluggish bond sale and concern over disappointing US corporate earnings would put more pressure on emerging Asian currencies, he added.
Doubts over Europe's ability to stick to harsh measures to slash high levels of public debt began to grow when Spain abruptly relaxed its deficit targets earlier this month. Italy said on Wednesday that its priority was reviving economic growth, delaying by a year its budget balancing goal.
WON
Dollar/won rose to 1,141.8, above the top of the daily Ichimoku cloud near 1,139.0. South Korean importers bought the pair, while local interbank players added long positions.
The foreign exchange authorities were suspected of selling dollar/won, especially above 1,140, and exporters joined the offers, dealers said.
The move caused interbank names to clear long positions.
"It is highly possible that the authorities stepped in, I think," said a foreign bank dealer in Seoul.
BAHT
Dollar/baht rose on offshore fund bids amid worries about Spain's bond sale.
The pair is seen gaining further, probably to 31.063, the high of April 4. The level is also the 50 percent Fibonacci retracement of its Janunary-February slide, but the top of the daily Ichimoku cloud is near the level, so it may act as resistance.
SINGAPORE DOLLAR
US dollar/Singapore dollar edged up on demand from hedge funds, although the pair is seen dropping in the longer term because of recent central bank tightening, dealers and analysts said.
Standard Chartered recommended selling euro/Singapore dollar , saying central bank policy and Singapore's strong economic fundamentals would support the Singapore dollar, adding that the European Central Bank's liquidity measures implied that the euro would become the funding currency of choice.
StanChart said in a note that it expected euro/Singapore dollar to fall to 1.5625 at the end of the second quarter from the current 1.6410.