Markets

Taiwan dollar leads Asia FX gains; won dips after finmin

Published November 12, 2012 Updated November 12, 2012 07:57am

 

The Taiwan dollar rose 0.6 percent even after the central bank called traders to ask them to hold long US dollar positions for the day, in addition to light intervention, dealers said.

 

The Singapore dollar also saw inflows, while the Malaysian ringgit rose, tracking the yuan which jumped on continuous demand from Chinese corporates after the central bank set an unusually strong daily mid-point.

 

But the South Korean won ended the local market weaker after the finance minister spoke of Seoul contemplating possible measures to manage inflows and the authorities were spotted intervening, dealers said.

 

Investors stayed wary of US fiscal problems and Greece's putative bailout, but emerging Asian currencies are expected to stay firm as improvements in the world's top two economies - the United States and China - are likely to bring more money to the region, dealers and analysts said.

 

"Asia FX will remain with strong upside in the medium term, although risk aversion and year-end caution will limit strength," said Maybank FX research head Saktiandi Supaat in Singapore, adding rating upgrade expectations and higher yields will support regional currencies.

 

"People will be cautious as there will be brinkmanship before the new US congress reaches a final compromise," Supaat said of the US fiscal cliff.

 

President Barack Obama on Friday invited congressional leaders to the White House, kicking off negotiations to avoid the fiscal cliff by finding a compromise to cut the US deficit before nearly $600 billion worth of spending cuts and tax increases take effect in early 2013.

 

China on Saturday announced that it is effectively turning is likely to meet its growth target for the year.

 

Still, some investors hesitated to add more bullish bets on emerging Asian currencies as the global economy has not yet found strong growth momentum.

 

India reported a surprise fall in its industrial production in September, hitting the rupee, while Japan reported that gross domestic product contracted over July-September, the first decline in three quarters, putting pressure on Asian stocks.

 

Investors were also keeping an eye on a meeting by euro zone finance ministers later in the day to discuss whether to release a new tranche of funding for Greece. German Finance Minister Wolfgang Schaeuble told a German newspaper on Sunday that the troika of international lenders to Athens was unlikely to deliver its full report in time for Monday's meeting.

 

TAIWAN DOLLAR

 

The Taiwan dollar touched 28.959 to the greenback, its strongest since Sept. 1, 2011 on inflows from foreign financial institutions.

 

Some foreign accounts bought the spot Taiwan dollar, while selling the island's currency in non-deliverable forwards (NDFs) markets with NDF curves below onshore forward curves, dealers and analysts said.

 

Some domestic exporters hurredly bought Taiwan dollars for settlements while others waited for weaker levels to buy it on dips, dealers said.

 

The central bank was spotted buying the US dollar to stem the local unit's strength, although the intervention was "mild", market participants noted.

 

WON

 

The won eased after the finance minister said the government was looking more seriously into tightening regulatory measures on capital inflows to curb the won's rally.

 

South Korean exporters snapped up chances to buy the local currency for settlements, especially around 1,090 per dollar, helping the unit turn higher, dealers said.

 

Some dealers suspected the authorities of buying dollars, especially in the last minutes of domestic trading.

 

"Supply and demand conditions still remain favourable for the won. Despite such comments, I don't want to add dollar positions as I doubt how strongly the authorities can intervene," said a senior foreign bank dealer in Seoul.

 

A day before the finance minister's comments, Vice Finance Minister Shin Je-yoon said the country will not yet take steps to counter the rally in the won.

 

SINGAPORE DOLLAR

 

The Singapore dollar gained on inflows of foreign funds and leveraged accounts buying the city-state's currency.

 

But the local unit could not extend gains as investors were cautious over possible intervention by the central bank to prevent the Singapore dollar from strengthening past 1.2200 per US dollar, dealers said.

 

RINGGIT

 

The Malaysian ringgit edged higher on strong China's exports data and the yuan's surge, but the currency's upside was limited as local corporates bought dollars around 3.0600, dealers said.

 

Copyright Reuters, 2012