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Published: Wednesday February 13, 2013 MYT 3:58:00 PM

Won leads gains as firm yen spurs inflows; baht also up


SINGAPORE: The won rose on Wednesday, leading gains among emerging Asian currencies, as a firmer yen persuaded foreign investors to pile into shares of South Korean exporters.

The Thai baht also advanced on demand from gold investors, while the Malaysian ringgit gained on prospective exporters' demand.

The yen jumped on Tuesday as investors cut bearish positions after an official from the Group of Seven cited concerns about excessive movements in Japan's currency.

Investors are keeping an eye on a meeting of the Group of 20 finance ministers and central bankers in Moscow on Friday and Saturday to see their potential response to the yen's recent depreciation.

Still, dealers and analysts said it was premature to conclude that emerging Asian currencies will return to their 2012 appreciation trend as long as Japan keeps chasing reflationary policies.

"At this juncture it may not reverse yen's weakening given Japan's resolve to undertake monetary easing in 2014. But the easing may be slowed down with global political resistance, given weak global growth which strengthens resistance on competitiveness grounds," said Saktiandi Supaat, head of FX research for Maybank in Singapore.

"The rest of the Asian currencies may stay under pressure if yen weakness persists. Simply, on a trade weighted basis, most Asian currencies are less competitive compared to the yen."

Some emerging Asian currencies, especially the won, lost ground this year as a weaker yen bit into their export competitiveness in overseas markets.

Regional authorities have expressed concern about the negative spillover effects from massive easing policies undertaken by several major central banks over the last year, and some Asian policymakers have warned of possible measures to stem their currency appreciation or better manage capital flows.

"Every Asian currency is looking at the yen. We are scared that Japan will be very competitive if the dollar/yen goes to 100," said a senior Malaysian bank dealer in Kuala Lumpur.

Incoming fund flows to rest of Asia helped their currencies post annual gains in 2012.

RINGGIT

The ringgit gained as some interbank speculators bought it on expectations of demand from exporters for settlements.

Still, trading stayed subdued as many market players including some corporates had not returned to work yet after the Lunar New Year holidays, dealers said. Investors hesitated to chase the ringgit on sustained views of a weaker yen, they added. "After long holidays, exporters have lots of export proceeds to convert. But I'd rather buy dollar/ringgit on dips as its bias is up," said a Malaysian bank trader in Kuala Lumpur. The trader added he would purchase dollar around 3.0800-3.0850 to the ringgit. WON The won advanced on stop-loss dollar selling and continuous bond inflows. Seoul shares rose 1.6 percent with foreign investors' sustained purchases. But the South Korean currency gave up much of initial rises on dollar demand from state-run importers, traders said. Investors were also reluctant to chase the won as the yen is expected to stay soft, traders said.

"The yen is still seen on a trend to head to 100 (per dollar). So, the won is unlikely to strengthen past 1,080," said a senior foreign bank dealer in Seoul. BAHT The baht rose after gold rebounded on Tuesday in New York and on stronger local shares.

Gold is popular among Thai investors, and rises in gold prices often prompt some to sell holdings in the physical metal or in gold futures and take profits. In turn, they convert their dollar proceeds from such trades back into baht.

But the baht is unlikely to extend gains on growing speculation of an interest rate cut later this month. Importers are expected to buy dollars on dips, traders said. Investors also remained wary of possible intervention by the central bank to cap further appreciation in the best performing emerging Asian currency so far this year. "I expect dollar bids to surface near 29.80. On today's dip, we will see some demand," said an Asian bank trader in Singapore, adding the baht may face resistance around that level. RUPIAH The rupiah edged up in thin trading on demand from some local lenders and state-run banks, tracking gains in other emerging Asian currencies, traders said. Jakarta shares also hit a record high, supporting the rupiah. But the Indonesian currency gave up most of initial rise on dollar demand from domestic importers, they added.

A Jakarta-based trader said he expected the rupiah to benefit from foreign stock inflows but the currency's upside would be limited on local importers' dollar bids.

The rupiah is likely to move between 9,620 per dollar and 9,670, the trader added. - Reuters

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