SINGAPORE: Most emerging Asian currencies eased on Tuesday as investors booked profits from their recent rally after the Federal Reserve's policy stimulus last week, although some still bought them on dips with expectations of more inflows to the region. Interbank speculators reduced bullish positions in the Malaysian ringgit, and the Thai baht, while the South Korean won eased on bond outflows. The Indonesian rupiah slid on dollar demand from local corporates, and the Philippine peso came under pressure with most short-term peso forwards quoted at a discount. Such depreciations came a day after most emerging Asian currencies were technically seen excessively bought with many of the 14-day relative strength indices (RSI) of dollar/regional unit pairs below the threshold 30. Asian shares also slid on renewed concerns over a slowing Chinese economy ahead of a manufacturing survey, the HSBC flash purchasing managers' index (PMI) on Thursday. Still, analysts saw the slide in regional units as short-term technical corrections and said emerging Asian currencies were expected to keep enticing investors who hunger for higher yields. "It is not surprising to see some retracement after a strong rally. With the big uncertainties of QE and German court ruling out of the way, this round of support to risk assets should be more sustainable," said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong, adding she favours the won, the Philippine peso and the ringgit. Emerging Asian currencies have risen so far this month as the Fed took a third round of quantitative easing to shore up the world's top economy and on European policy makers' steps to tackle the euro zone's debt crisis. Earlier this month, the European Central Bank announced a fresh bond-buying programme and Germany's constitutional court last week approved the euro zone's bailout fund. Cheung said any falls in emerging Asian currencies will provide better entry levels to add bets on those units, even though some are concerned that Spanish bond yields have risen over the past few days. "It is a long term process to settle the debt problem there, investors are more concerned if there is a plan to tackle that, rather than if that can be solved in the near term," she added. Still, some analysts predicted more weakness in emerging Asian currencies with a sluggish global economy biting into the export-reliant area, saying optimism from the Fed's stimulus move was likely to fade. "I expect further unwinding of long Asia ex-Japan FX trades that were accumulated prior and during the announcement of QE3 by the Fed," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur. "Spain is a concern with market pricing in the risk of a 300 billion euro bailout, then the Fed's $40 billion per month 'open ended' MBS exercise is looking more like a drop in the ocean," said Ramanathan, adding that the won, the Singapore dollar and the ringgit would be most vulnerable among regional units to such position adjustments. RINGGIT The ringgit weakened as traders cut optimistic bets on the currency, tracking a softer euro. The dollar/ringgit's 14-day RSI rebounded to 36.25. The index stood at 24.77 the previous session, indicating the ringgit was excessively bought. "I won't be surprised if we see 3.08 or 3.09 when the euro drifts lower to 1.30. The Spain problem is slowly surfacing," said a Malaysian bank dealer in Kuala Lumpur. RUPIAH The rupiah fell on dollar demand from Indonesian corporates and a few foreign banks covered dollar-short positions, dealers said. A Jakarta-based dealer saw the weakness as just short-term corrections, saying he would buy the rupiah on dips. Offshore funds purchased the local unit at 9,500 per dollar. "Surprisingly, the recent momentum of selling dollars ceased and has been replaced by buying demand. But this is just a momentary correction unless we see data showing Indonesia's fundamentals getting worse again," the dealer said. He said he would buy the rupiah around 9,600, although its strength would be capped at 9,400 for the time being. PHILIPPINE PESO The Philippine peso slid as traders reduced long positions in the currency amid caution over possible intervention by the central bank and with most short-term forwards staying negative. The peso may ease further as investors adjust optimistic bets on the unit, but macro funds bought it on dips and some traders looked to join the bids. "Negative onshore swap points were putting pressure on dollar shorts, but I feel that levels at 41.80-41.90 would be good levels to short dollars again as negative external risks have diminished," said a foreign bank dealer in Manila. Most of the short-term peso forwards from overnight to two-months were quoted at a discount, indicating that it was costlier to hold a short dollar position. WON The won edged lower on dollar demand linked to foreign investors' bond sales and domestic importers also placed bids on greenbacks for payments. But stock inflows limited the local currency's downside. Foreign investors extended a buying spree in Seoul's main stock market to an eighth consecutive session by purchasing a net 49.2 billion won worth of Korean won. - Reuters
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