Friday, December 2, 2011

EM ASIA FX-Asian FX set for weekly gains on joint cbank action

SINGAPORE (Dec 2): Emerging Asian currencies are poised for their first weekly gain since late October buoyed by the joint central bank action and some short-covering , although caution ahead of the U.S. jobs data and dollar-buying by regional central banks kept them subdued on Friday.

Market players were also reluctant to take big bets ahead of a pivotal European summit next week that will try to determine a strategy for dealing with debt crisis.

A stronger-than-expected U.S. non-farm payroll may bring buyers back to riskier assets such as emerging Asian currencies. Forecasters expect November brought creation of 122,000 jobs in November and a steady jobless rate at 9.0 percent. Some dealers and analysts said positive figures have been reflected in the market to some degree.

"A rise of between 125,000 and 150,000 will not produce mush response from Asian currencies," said Jonathan Cavenagh, foreign exchange strategist for Westpac in Singapore.

A figure above 175,000 may boost the regional currencies, particularly the South Korean won, the Malaysian ringgit and the Singapore dollar, around 0.5 percent, he added.

So, stronger data will not guarantee a big jump in the regional units, given persistent worries about the crisis in Europe crisis, dealers and analysts said.

In the last week of October, emerging Asian currencies rose after the euro zone's leaders agreed on a plan to ease the continent's debt problems. But later, most emerging Asian currencies continued to suffer weekly losses.

Suresh Kumar Ramanathan, regional rates and foreign exchange strategist for CIMB Investment Bank in Kuala Lumpur, said he doesn't expect Asian currencies to rise further, as risk aversion remains high as do fears of possible sovereign defaults in Europe.

"Asia FX is now moving into a transition of weaker global growth, weaker domestic growth and easy monetary policy, all ingredients of weaker currencies," he said, adding there are no reasons to buy Asia ex-Japan FX in the current environment.

Investors are keeping an eye on the European Union (EU) summit next week to see if the continent's policymakers will make more progress.

French and German leaders are meeting next Monday to outline joint proposals to put to a Dec. 9 EU summit, seen as -- yet another -- make-or-break meeting for the 12-year-old currency bloc.

The European Central Bank hinted on Thursday it was ready to move more aggressively to tackle the crisis if politicians agree on much tighter budget controls in the euro zone, though it stopped short of detailing what exact measures it would take.

Still, there is no agreement among EU policymakers regarding how such controls could be implemented and many other problems, including securing resources to leverage the euro zone's bailout fund, linger unresolved.

This week, most emerging Asian currencies have risen as investors covered short positions after the world's top six central banks acted jointly to ease a liquidity crunch.

The won rose 2.9 percent against the dollar for the week, outperforming its Asian peers, according to Thomson Reuters data, as a central bank in central Asia bought the local currency for the country's bonds.

The ringgit, the second best performing among emerging Asian currencies, has gained 2.2 percent on the week. WON Dollar/won rose as investors covered short positions and on importers' demand for settlements.

Investors were also stayed wary of possible buying intervention by the foreign exchange authorities.

"It looks safer to hold long positions. If we see strong non-farm payroll, the pair may dip a bit. But it will head to the north again," said a foreign bank dealer in Seoul.

SINGAPORE DOLLAR

U.S. dollar/Singapore dollar edged up on short-covering on caution over possible intervention and on weaker stocks. There was market talk on Thursday that agent banks of Singapore central bank was seen to keep the pair above 1.2800, dealers said.

RINGGIT Dollar/ringgit fell on interbank speculators selling triggered by a higher euro, breaking support of 3.1380, the 38.2 percent Fibonacci retracement of its rise between late Oct and Nov. The pair may head to the 50 percent retracement level at 3.1195, although investors are keeping an eye on the U.S. jobs data later in the day.

BAHT Dollar/baht fell below a 55-day moving average, staying around the 61.8 percent Fibonacci retracement of its increases between late Oct and Nov. The pair edged down to 30.830, breaking through the average of 30.870 and near the retracement of 30.822. If it clears the retracement, it may possibly slide to 30.677, the 76.4 percent retracement. But investors were cautious over possible dollar-buying intervention by the central bank. Some dealers said the Bank of Thailand has stepped in the market from 30.800. A central bank official said the strength in the baht is not much and it is moving in line with regional currencies.

PHILIPPINE PESO Dollar/Philippine peso edged down, although it recovered most of its slide on short covering. Some interbank speculators are looking to sell the pair on hopes for strong U.S. job data. "With the string of bad news during the past couple of weeks, I think the market is very eager for any good news," said a European bank dealer in Manila. The dealer said the pair has room to slide to 43.00 and 42.50.- Reuters

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