SINGAPORE: Most emerging Asian currencies rose on Thursday as investors covered short positions on hopes for fresh European action to ease the continent's debt crisis and more US stimulus, but sustained euro zone concerns kept gains in check.
The South Korean won outperformed Asian peers as local exporters bought it for month-end settlements.
The Malaysian ringgit and the Philippine peso gained on demand from interbank players, while many other investors were reluctant to add more bullish bets.
On Wednesday, European Central Bank (ECB) Governing Council member Ewald Nowotny said he could see grounds for giving the euro zone bailout fund a banking license that would increase its crisis-fighting firepower.
That helped the euro rebound on short-covering, but the momentum declined after ECB President Mario Draghi poured cold water on the idea. In turn, short-covering in emerging Asian currencies slowed.
"Given deteriorating problems in Spain and Italy, the euro zone needs some political agreements, although there is a long way to go," said Jeong My-young, Samsung Futures' research head in Seoul. "The longer the problems last, the fewer solutions they would have."
Jeong said that investors "do not have choices other than to take profits (from emerging Asian currencies) as Europe's issues wouldn't be solved overnight and we are at a low-growth stage."
Data showed new US home sales in June suffered their biggest drop in more than a year and prices resumed their downward trend, increasing expectations of more easing steps by the Federal Reserve to support the ailing economy.
Evidence also increased that the global slowdown is biting emerging Asia, and regional monetary policymakers are seen as becoming more open to adopting easing stances.
South Korea's economic growth slowed more than expected and barely averted a decline, central bank data showed on Thursday.
On Wednesday, Thailand's central bank left its main interest rates, but some committee members wanted a cut. One day earlier, the Philippine central bank chief made dovish comments.
WON
The won rose as domestic interbank players added positions and on exporters' demand.
Investors were reluctant to chase the local currency on expectations that importers are likely to take the dollar's slide as chances to buy it on dips.
Market players were not convinced either that the European Stability Mechanism (ESM) may get a banking license.
"Investors priced a positive factor on the ESM, but its impact was not that big as that is still under discussion. So, e influence from the factor won't last long," said a local bank dealer in Seoul.
RINGGIT
The ringgit gained and broke through 3.1662 per dollar, the 50 percent Fibonacci retracement of its depreciation between July 20 and July 25.
Once that level is cleared, the Malaysian currency is seen heading to 3.1607, the 61.8 percent retracement.
A Kuala Lumpur-based dealer said the local currency has room to strengthen to that level, adding the euro may rise a little more.
PHILIPPINE PESO
The Philippine peso advanced although investors were cautious before a rate decision later on Thursday by the central bank.
The central bank is expected to keep its policy rate unchanged later in the day, but more investors expected a cut after the governor said on Tuesday the monetary authority had some scope to adjust monetary policy.
If Bangko Sentral ng Pilipinas (BSP) cuts its rate, the peso may strengthen past 42.00 per dollar, a European bank dealer in Manila said.
"A rate cut would spur more economic activity and prop up the stock market. The BSP has room to do so as inflation has been steady," the dealer added.
SINGAPORE DOLLAR
The Singapore dollar hit a session high of 1.2536 per US dollar after the city-state reported better-than-expected industrial output data.
Industrial output in June rose a seasonally adjusted 3.9 percent from the previous month, far stronger than the market expectation that output would be flat.
TAIWAN DOLLAR
The Taiwan dollar rose as interbank players took profits after recent gains in the US dollar.
But the rise in the island's currency was capped as foreign financial institutions sold it on rallies, dealers said.
Taiwan exporters bought the local unit, but demand was not large even though the month-end is approaching.
The Taiwan dollar was expected to remain between 30.100 to the greenback and 30.200, dealer said.
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