Ringgit at five-month low on bond outflows

A Bank Negara employee holds up new ringgit notes in Kuala Lumpur December 21, 2011. — File picA Bank Negara employee holds up new ringgit notes in Kuala Lumpur December 21, 2011. — File picSINGAPORE, Jan 31 — The ringgit fell to a near five-month low today, heading for its worst month in eight months along with some of it Asian peers, and most regional units are expected to remain weak in the near-term as investors fear more interventions.

The ringgit weakened past a long-term chart support on bond outflows and selling from real money funds.

Domestic interbank speculators scrambled for dollars to cover short-positions in the greenback, dealers said.

The Singapore dollar eased as real money accounts and macro funds sold it.

The South Korean won slid as offshore funds kept selling it and foreign investors continued to unload Seoul shares.

The Indonesian rupiah also came under pressure from month-end dollar demand from importers.

“The yen is weaker, the dollar is gaining momentum and Asian units will face the brunt of the dollar strength. For far too long markets have developed this immunity assuming that the dollar is a very weak currency,” Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur.

“The recent move in Asian units to the weak side, is a reflection of those who were caught napping on the weak side of the dollar, and the gapping to the upside in Asian units this week just tells us that there were many in Asia that were just too bearish on the dollar.”

Most emerging Asian currencies fell in January on profit-taking by foreign portfolio investors who saw their recent gains, especially against the yen, as excessive. 

Some analysts and dealers saw possibilities of funds flowing from Asia to the euro zone, where some signs of recovery are slowly emerging.

Regional foreign exchange authorities have expressed concerns over their currency appreciation, warning of possible regulatory measures to cope with hot money inflows.

Today, the Philippines joined China, South Korea and Thailand in strongly voicing its concerns, with a senior Manila economic official saying the country is studying how to tackle the strong peso.

Philippine authorities were also spotted intervening to keep the peso from appreciating further in the wake of stronger-than-expected fourth-qarter GDP data. In January, both the won and the ringgit lost 1.7 per cent against the dollar.

Their losses would be the largest monthly slide since May 2012, according to Thomson Reuters data.

The Singapore dollar and the Taiwan dollar have depreciated 1.3 per cent, the data showed. If they maintained the falls, they would be the largest since the same period, the data showed.

The Indonesian rupiah’s indicative prices have also fallen 1.2 per cent, according to Thomson Reuters data.

But few analysts and dealers saw such losses as a sign that emerging Asian currencies are losing their long-term appreciation trend, given stronger economic fundamentals.

Asian authorities will not kick foreign investors out of their countries, even though they are likely keep warning of possible steps to cope with sharp currency strength, they added.

“They seem to be verbally threatening to act. That’s enough to make markets cover dollar shorts,” said BNP Paribas currency strategist Thio Chin Loo in Singapore.

“But Asia FX will consolidate near term, rather than fall,” said she, adding emerging Asian currencies’ long-term outlook remained bright.

Some regional units enjoyed strong capital inflows this month.

The Indian rupee jumped 3.2 per cent in January, its largest monthly gain since September last year, according to Thomson Reuters data.

The Thai baht has gained 2.6 per cent, its largest monthly rise since July 2011.

The ringgit hit 3.1140 per dollar, its weakest since September 7 last year, on selling from real money funds on caution over the upcoming general election. Bond-linked outflows also weight on it.

The Malaysian currency weakened past chart support at 3.0922, a 200-day moving average.

It had been firmer than the average since early September 2012. It may head to 3.1275, the 61.8 per cent Fibonacci retracement of its appreciation between June 2012 and January.

“The ringgit will be affected by election talk next month too,” said a Malaysian bank dealer, adding the ringgit could see 3.1300. The polls must be called by end April. The ringgit’s weakness dragged the neighbouring Singapore dollar lower. Real money accounts and macro funds sold the city-state’s currency, dealers said.

The won slid on sustained dollar demand from offshore funds as foreign investors continued to sell shares, although local exporters bought the currency on dips for settlements.

The government warned yesterday it might consider a number of measures to curb speculation on the currency including a tax on financial transactions.

“The won is expected to stay weak as investors appear to still hold long positions to clear. It looks better to sell the won whenever exporters lift it,” said a senior foreign bank dealer in Seoul.

The South Korean unit is seen having room to weaken to 1,100 per dollar with a 120-day moving average at 1,097.8. Still, investors are likely to buy the won on dips, given stronger economic fundamentals in Asia’s fourth-largest economy, analysts said.

“What we have seen is a position squeeze, particularly in dollar/won. In the short term, this may extend up to around 1,100-1,105 but that would be a good area to get back in,” said Callum Henderson, global head of FX research with Standard Chartered Bank in Singapore.

The rupiah’s indicative price fell 0.7 per cent to 9,745 per dollar with its traded levels softer at around 9,800 in a thin market, dealers said.

The Indonesian currency was under pressure from month-end dollar demand of local importers, while the central bank was spotted providing dollar liquidity, they added. But domestic corporate dollar demand eased and the rupiah may find some relief next month, some dealer said.

“Next month, it would be probably in a range of around 9,720 and 9,800, expecting more inflows on the government bond auction,” said a Jakarta-based dealer.

On Tuesday, the country raised 8.5 trillion rupiah ($870.23 million) in a debt auction, higher than an indicative target of 7.0 trillion, official data showed.

The Philippine peso eased despite stronger-than-expected growth data as the central bank was spotted buying dollars to slow down its appreciation.

The economy expanded 1.5 per cent in the fourth quarter from the previous three months, beating market forecasts of a 0.6 per cent rise.

The healthy economic fundamentals kept the peso’s outlook bright, but some investors doubt how much further the currency can rise, given possible intervention by the central bank.

Foreign investors may take some profits from local stocks , which hit a record high.

“I wouldn’t be surprised if I see any pullback in equities from today to next week ahead of the new year,” said a foreign bank dealer in Manila, referring to the Lunar New Year holidays in early February.

 The dealer said the peso is unlikely to strengthen past its previous high of 40.55 per dollar in the short term. — Reuters



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