Greece turmoils hit Asia FX, caution by cbanks contains slide

SINGAPORE, May 14: Most emerging Asian currencies slid on Monday as investors cut risky assets further after talks in Greece to form a new government failed and a German vote pointed to growing opposition to austerity steps.
Increasing worries about political uncertainty in the euro zone outweighed any gain from China’s cut in banks’ required reserve ratio at the weekend to support the world’s second-largest economy.
The rupiah underperformed its Asian peers on foreign banks’ selling, although dealers said the central bank put a brake on the Indonesian currency’s slide.
The South Korean won followed the rupiah, hovering around a near four-month low, as foreign investors continued to unload the country’s stocks.
Some dealers said emerging Asian currencies along with other risk assets appeared to be excessively sold a bit, but this did not mean that it was time to buy them on dips yet.
‘If we see any good news from Athens, we could see a small rally in risk assets,’ said a senior Malaysian bank dealer in Kuala Lumpur, adding that risky assets, including regional currencies, were oversold.
‘Still, Greece politicians are walking in and out of place, trying to form an interim government just to get the bailout money. Germany Merkel’s party lost in the weekend election and Spanish banking is sinking. Keeping risks short is the only thing to do now,’ the dealer added.
Greece’s radical leftist leader spurned an invitation from the president for a final round of coalition talks on Monday, all but ensuring a new election that he is poised to win.
Chancellor Angela Merkel’s conservatives suffered a crushing defeat on Sunday in an election in Germany’s most populous state, a result that could embolden the left opposition to step up attacks on her European austerity policies.
But caution is also growing over intervention by Asian authorities to defend their currencies.
Dealers said that on Monday morning, Bank Indonesia renewed a request made late last week not to buy dollar/rupiah above 9,250, stopping foreign banks’ bids for the pair, in addition to actual dollar selling.
The rupiah’s indicative price weakened to 9,240 per dollar, but its dealt prices were higher than that, with 9,270 actually traded, according to dealers.
Some state-run banks have been spotted at 9,240, dealers said.
The won softened to as weak as 1,149.8 versus the dollar, the weakest since Jan. 17, as foreign investors are poised to sell Seoul shares for a ninth consecutive session.
Investors are wary of possible dollar-selling intervention by South Korean foreign exchange authorities, dealers said.


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