Markets

Hopes of Greece deal give support but gains capped

Published November 26, 2012 Updated November 26, 2012 10:11am

 

The Taiwan dollar and the South Korean won were among the gainers, helped also by exporters' month-end demand in the trade-reliant economies.

 

The Philippine peso also strengthened on stronger inflow of remittances and as the local stock market hit a record high.

 

Still, the currencies failed to extend gains as investors were wary of intervention by local authorities concerned about the impact of stronger currencies on national exports.

 

Some dealers suspected that foreign exchange authorities in Manila and Seoul bought US dollars to stem appreciation in the won and the Philippine peso -- the two best performing emerging Asian currencies this year.

 

"Possible tighter monitoring of currencies by local regulators could curb Asian currencies gain in near term," said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong.

 

South Korea has been seen as taking an aggressive path to stop gains in the won, especially against the yen, which has eroded the export competitiveness of companies such as Hyundai Motor Co.

 

The currency hit its strongest in more than 16 months versus the yen on Nov.22.

 

TAIWAN DOLLAR

 

The Taiwan dollar gained on exporters' demand in subdued trading.

 

The island's stocks extended gains on reports the cabinet aims to have T$300 billion ($10.3 billion) from state-owned banks and government pension funds ready to invest in domestic stocks to shore up the stock market.

 

But the measure is unlikely to spur foreign financial institutions to bring more money to support the Taiwan dollar, currency dealers said.

 

Those institutions already bought short-term bonds and they would switch money from bonds to stocks, they said.

 

The central bank is expected to keep intervening in the currency market, reducing space for those foreign investors to take advantage, they added.

 

WON

 

The won advanced as some exporters bought it for settlements and interbank speculators expected more demand from such corporates in the last week of the month.

 

Still, sustained caution over possible intervention by the foreign exchange authorities capped its upside.

 

Some dealers suspected dollar bids from the authorities, and domestic importers joined purchases of the greenback.

 

"Given the authorities' tougher stance, it would be difficult even for exporters to chase the won. So, the 1,080 line will be defended," said a senior foreign bank dealer in Seoul, referring to the won's exchange rate to the dollar.

 

RINGGIT

 

The ringgit gained in thin trading amid hopes that euro zone finance ministers are likely to agree on a deal to get international lenders to release aid to Greece in time for debt repayments due mid-December.

 

But the Malaysian currency found a technical resistance line around 3.0500 per dollar with the kijun line on the daily Ichimoku chart at 3.0512. The ringgit has closed sessions weaker than the kijun line since Nov 8.

 

A Malaysian bank dealer in Kuala Lumpur said he would not add bullish bets on the ringgit around 3.0500 due to the chart resistance, although he expects Europe to agree on aid for Greece.

 

PHILIPPINE PESO

 

The Philippine peso strengthened to 41.00 per dollar on remittances inflows, and with the country's stocks hitting a record high.

 

The peso, however, failed to strengthen past the psychologically important level as some suspected the central bank of buying dollars.

 

A foreign bank dealer in Manila said the currency is unlikely to break 41.00 for now.

 

"The market is already short dollar from last week and equities are vulnerable for some profit-taking," the dealer said.

 

The peso was the best performing emerging Asian currency last week with a 0.7 percent gain against the dollar, according to Thomson Reuters data. It has risen 6.9 percent so far this year, becoming the top performer among regional unit.

 

SINGAPORE DOLLAR

 

The Singapore dollar eased as the city-state's industrial production in October rose 3.3 percent from the previous month, missing market expectations.

 

Demand for the greenback from local corporates amid intervention caution also put pressure o9n the Singapore dollar.

 

Copyright Reuters, 2012