Won bolts to 7wk high on foreigners stock buying
Indonesia expected to defend level of 8,705 rupiah vs dlr
SINGAPORE: Hedge funds piled into the won on Wednesday, lifting it to a seven-week high against the dollar and suggesting the South Korean currency may lead other Asian currencies higher in the second quarter with foreign equity flows to the region expected to remain solid.
The won climbed to as high as 1,103.90 per dollar in local trade as the surprising absence of intervention by Korean authorities caused macro funds and other investors to bail out of short won positions, accelerating the upward move.
The won's rise stood out on the day, with many other emerging Asian currencies relatively steady. Yet with regional equity markets reflecting strength from foreign inflows, other currencies may follow the won higher.
The won ended local trade at 1,104.2, the strongest close since late April 2010. It is on track to be the third-best performing emerging Asian currency in the first quarter, up 2.8 per cent.
After the local closed, it strengthened further to 1,101.6, the firmest level in offshore trade since Feb 9.
A lack of intervention boosted views that South Korea's foreign exchange authorities may allow more appreciation in the won to fight inflation.
Indonesia's central bank was again spotted checking the rupiah's gains, dealers said, though upward pressure on the rupiah from offshore players may end up dragging the pair toward 8,705 in the medium term.
"It is stuck because the central bank keeps intervening to support USD/IDR, so it doesn't break the 8,705 level. But flows are coming, betting on the IDR's further strength due to inflows from commodities exports and lower inflation figures for March," said a Jakartabased dealer.
Standard Chartered recommended using the baht as a funding currency to buy other emerging Asian currencies such as the ringgit and rupiah.
The baht has lost 0.53 per cent so far this year, becoming the worst performing currency among emerging Asian units. - Reuters