SINGAPORE, Nov 7: The South Korean won hit a 14-month high on Wednesday, leading gains in emerging Asian currencies, as the re-election of U.S. President Barack Obama is expected to maintain accommodative policies which will keep funds flowing to the region.
Offshore macro funds and domestic exporters including shipbuilders chased the won although the foreign exchange authorities were suspected of stemming the local unit’s strength, dealers said.
The Taiwan dollar hit a three-week high on inflows of foreign financial institutions and as interbank speculators and exporters bought the local unit.
Interbank speculators added bullish bets in the Malaysian ringgit, while leveraged funds lifted the Singapore dollar.
Obama won a second term in the White House defeating Republican challenger Mitt Romney and overcoming deep doubts about his handling of the U.S. Economy.
The victory ensured that the Federal Reserve’s quantitative easing would be in place. Romney had said he would not reappoint Ben Bernanke as Federal Reserve Chairman if he won the presidential election.
The greenback broadly fell as the yield on 10-year U.S. Treasuries dropped seven basis points to as low as 1.68 percent.
‘Obama will likely keep Bernanke which points to a dovish Fed, also supporting inflows to Asia. A continuity by Obama will also support market sentiment in general,’ said Frances Cheung, senior strategist at Credit Agricole CIB in Hong Kong. Cheung said she favoured the won as a leading currency among emerging Asian currencies.
Regional units have been key beneficiaries of monetary policy easing by major central banks as such steps caused investors to seek higher yields in stronger economic and fiscal fundamentals.
Still, Obama’s success does not necessarily mean a clear appreciation path for emerging Asian currencies, especially as he needs to tackle the ‘fiscal cliff’—some $600 billion in government spending cuts and higher taxes to take effect in January.
Obama may face obstacles with Congress still split between Democrats and Republicans, dealers and analysts said.
If he fails to avoid the fiscal cliff, a sprouting recovery in the world’s top economy and Asia’s main export market may be threatened by recession.
‘I am still reasonably bullish on Asia FX in general. Yield and GDP growth expectations will drive it. But any crazy event on the fiscal cliff will be a risk-off event,’ said Adam Gilmour, head of FX & derivatives sales at Citigroup in Singapore.
WON
The won broke through the psychologically important 1,090 per dollar to hit 1,085.4, its strongest since Sept. 9, 2011.
The authorities were suspected of having slowed the won’s strength, especially when the local unit was firmer than 1,090, dealers said.
Despite modest intervention and a plan to inspect foreign exchange trading at key banks operating in the country, the authorities are unlikely to weaken the won, some dealers and analysts said.
On a trade-weighted basis, the won is still undervalued against its key competitors, such as the yen and yuan, they added.
Technically, the won is likely to head to 1,077.7, its weakest on Sept. 9, 2011.
TAIWAN DOLLAR
The Taiwan dollar touched 29.150 to the greenback, its strongest since Oct. 17.
Interbank speculators chased the island’s currency, following the won’s strength initially, while foreign financial institution brought money after Obama won the election, dealers said.
The central bank was spotted buying dollars around the session high, but the intervention was not that strong, some dealers said.
RINGGIT
The ringgit earlier gained as much as 0.4 percent to the dollar to strengthen past the 38.2 percent Fibonacci retracement at 3.0513 of its weakness since mid-October as investors dumped dollar holdings.
The Malaysian currency is seen appreciating further, probably to 3.0464, the 50 percent level if it ends the day stronger than the 38.2 percent line.
Despite worries about the U.S. Fiscal issue, some dealers were looking for chances to buy the ringgit on dips.
‘People looked to believe the worst is over. Will Obama or the G20 allow something bad on the fiscal cliff to happen?’ said a Malaysian bank dealer in Kuala Lumpur.
‘So, why should we hold the safe haven dollar?’
CURRENCIES VS U.S. DOLLAR
Change on the day at 0655 GMT
Currency Latest bid Previous day Pct Move
Japan yen 80.07 80.43 +0.45
Sing dlr 1.2209 1.2224 +0.12
Taiwan dlr 29.156 29.275 +0.41
Korean won 1085.25 1090.70 +0.50
Baht 30.67 30.76 +0.29
Peso 41.09 41.21 +0.29
Rupiah 9630.00 9615.00 -0.16
Rupee 54.22 54.43 +0.40
Ringgit 3.0540 3.0630 +0.29
Yuan 6.2437 6.2456 +0.03
Change so far in 2012
Currency Latest bid End prev year Pct Move
Japan yen 80.07 76.92 -3.93
Sing dlr 1.2209 1.2969 +6.22
Taiwan dlr 29.156 30.290 +3.89
Korean won 1085.25 1151.80 +6.13
Baht 30.67 31.55 +2.87
Peso 41.09 43.84 +6.69
Rupiah 9630.00 9060.00 -5.92
Rupee 54.22 53.08 -2.09
Ringgit 3.0540 3.1685 +3.75
Yuan 6.2437 6.2940 +0.81
(Additional reporting by Miao-jung Lin in TAIPEI and IFR Markets’ Catherine Tan; Editing by Jacqueline Wong)
(AGENCIES)
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