SINGAPORE - The Singapore dollar hit a three-month low on Monday as investors cut long positions in anticipation that the Monetary Authority of Singapore could intervene to dampen the currency's strength, while South Korean authorities pushed down the won.
Though most other Asian currencies gained, their upside was limited by investors' wariness over the potential for intervention by central banks, dealers said.
"We should open a door to dollar buying intervention by almost all Asian countries, except Indonesia," said Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul.
Model funds and interbank speculators sold the Singapore dollar, while investors also showed interest in selling the city-state's currency against the Malaysian ringgit.
The Singapore dollar touched 1.2314 against the US dollar, its weakest since Oct. 10, and technical factors could push it down to 1.2336, its weakest since October last year.
The city-state's currency has lost 0.7 per cent so far this year, according to Thomson Reuters data.
Manufacturing activity in Singapore contracted for a sixth consecutive month in December, bucking the improvement seen in many other countries, an industry survey showed last week.
The weak data was seen raising chances that the Monetary Authority of Singapore would intervene to dampen the strength of a Singapore dollar that rose 6.1 per cent against the US dollar last year.
"The data remains fairly poor, so that is seeing the Singapore dollar underperform some of the other currencies within the region," said Jonathan Cavenagh, a senior FX strategist at Westpac in Singapore.
The won turned weaker after hitting a 17-month high against the dollar as the South Korean authorities were spotted selling the currency to forestall further appreciation, prompting traders to cover short dollar positions, dealers said.
In contrast to regional peers trying to slow down appreciation in their currencies, Indonesia's central bank has been spotted selling dollars to prop up the rupiah.
Still, dealers and analysts expect emerging Asian currencies to stay firm due to expectations that the Bank of Japan will deliver more policy stimulus.
Japan's newly-elected Prime Minister Shinzo Abe reiterated his call for bold easing by the central bank, big fiscal spending and an economic growth strategy as steps towards conquering deflation.
The won ended trading in Seoul weaker due to central bank intervention having hit its strongest since Aug. 4 at 1,060.4 per dollar.
The authorities' intervention came as the South Korean currency hovered near a chart resistance of 12.000 to the yen.
On Friday, the won touched 12.0149, its firmest since May 2010 to the Japanese unit.
The won's strength against the yen is seen eroding South Korean exporters' competitiveness against their Japanese competitors.
Regardless of the authorities' efforts, the won is expected to appreciate further, heading to 1,049.1 per dollar, its 2011 peak, and 11.6872 versus the yen, its 2010 peak.
With the market trading around 1063 per dollar, traders said exporters were poised to buy won should the authorities succeed in pushing it back to 1,065.
"The won will keep finding support. It may be difficult to add short-term positions, but the won's bullish trend remains intact," said a foreign bank dealer in Seoul.
The Taiwan dollar advanced as exporters bought it when it weakened beyond 29.000 to the US dollar, dealers said.
But market players did not dare to push currency any stronger due to fear of possible central bank intervention.
The caution prompted some foreign banks to cover short US dollar positions. Some foreign financial institutions exiting weak Taiwanese stocks also sold the Taiwan dollar to repatriate their money, dealers said.
The rupiah fell on persistent dollar buying by corporates, and dealers said the Indonesian central bank was selling dollars.
The rupiah's indicative prices weakened 0.5 per cent to 9,700 per dollar on exchange pages, but traders said its real prices were weaker with 9,810 traded.
Some foreign banks bought the rupiah, possibly due to an inflow of funds to invest in a Jakarta stock market that hit a record high before giving up some ground.
But the inflow of funds headed for the share market was expected to take some pressure of the rupiah, dealers added.