SINGAPORE: Most emerging Asian currencies eased on Tuesday in slow trading as high yields at Italy's bond auction renewed investor aversion to risk despite hopes from the new leadership in Rome as well as Greece. Exporters sold dollars in South Korea and Thailand, lending support to the regional currencies. Italy sold 3 billion euros of five-year bonds at 6.29 percent on Monday, a euro-era record, fuelling worries the high borrowing costs would derail the country's efforts to slash its 1.9 trillion euro worth of debt. Spanish 10-year bond yield also rose above 6 percent for the first time since the European Central Bank started to buy the country's bonds in August and the weak sentiment hurt risky assets such as Asian stocks and credit markets. Currency traders are seeking to sell emerging Asian currencies for dollars, although they are wary of fluctuation risks. "We see non-stop of bad news from Europe. I will add long dollar/Asian currencies a little more," said a senior Asian bank dealer in Kuala Lumpur. Emerging Asian currencies, like other risky investments, drew support from hopes that new governments in Italy and Greece may make progress to tackle their sovereign debt crisis. On Tuesday, the South Korean won and the Thai baht slightly fell on the euro zone's worries, but local exporters provided support. The Philippine peso eased as some interbank speculators looked for chances to add long dollar positions. But dealers saw the pair staying in a range as euro remains steady for now. "Market is probably neutral at the moment with some looking to build long positions on dips," said a European bank dealer in Manila. The dealer expected the peso to trade between 43.20 per dollar and 43.40 and dollar/peso may see more upside momentum if 43.40 is cleared. But the deal said he did not see such possibilities yet. Meanwhile, Chinese yuan's non-deliverable forwards (NDFs) came under pressure as dealers said growing strains between US and China may cause Beijing to slow down appreciation of the currency. US President Barack Obama pressured China over its currency and trade policies during APEC summit on Sunday, while Chinese President Hu Jintao was quoted as saying US trade and employment problems would not be solved by a major appreciation of the yuan. "China understands the Obama's political posturing is in part targeting the domestic audience ahead of the election year, but certainly it wouldn't want to be seen as weak on the currency matters which are still at heart of its existing economic policies," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.

Source