SINGAPORE, June 28: Most emerging Asian currencies rose on Thursday with the Indian rupee and the Taiwan dollar outperforming, but regional units trimmed earlier gains before a summit of European leaders who are deeply divided on how to deal with the continent’s debt crisis.
The rupee advanced after Prime Minister Manmohan Singh’s call to formulate an economic revival plan and boost investor sentiment, while the Taiwan dollar gained on exporters’ demand.
Short-term investors such as interbank speculators bought the South Korean won, the Malaysian ringgit and the Singapore dollar after data showed demand for long-lasting U.S. Manufactured goods rebounded more than expected in May, a gauge of planned business spending increased and pending home sales rose last month.
But investors took profits from gains in emerging Asian currencies as a two-day EU summit starts later on Thursday with Germany, France and Italy divided. Asian corporates’ month-end dollar demand also checked rises in regional units.
In Manila, market players were cautious over possible dollar-buying intervention by the Philippine central bank to curb the peso’s strength.
‘It is going to be a likely case to buy dollars versus Asian FX until further clarity from more U.S. Data and the extent of the euro debt woes with Spain and Italy in the spotlight,’ said Enrico Tanuwidjaja, a currency strategist at Maybank in Singapore.
German Chancellor Angela Merkel on Wednesday brushed aside increasingly shrill calls from Spain and Italy for emergency action to lower their soaring borrowing costs. Merkel will pit herself against France and Italy in the summit.
The deep divisions within the key European players on the way forward does not bode well for sustaining any risk rallies at this juncture, OCBC Bank said in a note.
‘Time will tell if Merkel is bluffing and will eventually cave in to the market pressures, but this entails a choppy ride for markets in the interim,’ said the bank, adding that emerging Asian currencies remain vulnerable to swings in global risk appetite.
Reflecting the caution, regional units gave up some of their initial gains.
The Taiwan dollar earlier gained as much as 0.5 percent versus the greenback on exporters’ month-end demand, but market players booked profits in thin trading. The island’s currency rose 0.2 percent.
The Philippine peso also cut some of its initial gains as two dealers said they heard of dollar bids from agent banks of the central bank. Domestic corporates’ dollar demand also checked the peso’s upside, dealers said.
The won edged up, but South Korean importers took the dollar’s weakness against the local unit as a chance to buy the greenback for payments.
‘Dollar/won is unlikely to fall further if we don’t see
More exporters’ supplies,’ said a senior foreign bank dealer in Seoul. (agencies)
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