EM ASIA FX-High oil prices weigh on Asia FX, more slides possible

SINGAPORE, Feb 27 (Reuters) - Emerging Asian
currencies eased on Monday as investors trimmed positions in
them against both the dollar and the euro as higher oil prices
hurt risk sentiment while dealers and analysts saw more
corrections ahead for the regional units.
Some investors bought emerging Asian currencies on dips,
expecting sustained fund inflows to the region and encouraged by
signs of fresh steps by the Group of 20 major economies to
contain the euro zone debt crisis.
Still, those players were stayed wary of higher oil prices
affecting growth and inflation.
Brent crude eased slightly but stayed around 10-month highs
above $125 per barrel amid escalating tension over Iran's
disputed nuclear programme.
"Market is getting more concerned over oil prices. If Brent
breaks through $130, that will dampen overall risk assets
including Asian currencies," said Jeong My-young, a currency
strategist at Samsung Futures in Seoul.
Higher oil prices boost not only import bills of many Asian
countries but also inflationary pressure. Some Asian policy
makers have warned of rising prices because of inflows to the
region following liquidity increases by major central banks.
Rising prices have triggered shake-outs of long positions in
emerging Asian currencies in the past years.
Emerging Asian currencies may suffer further profit-taking,
especially in the wake of gains this year, analysts said.
Sailesh Kumar Jha, head of Asia market strategy at SEB in
Singapore, said the South Korean won would be most vulnerable to
a correction. He expects the won to weaken to 1,165 per dollar
by the end of the first quarter, compared with about 1,128 at
present.
But it was premature to conclude that higher oil prices mean
the end of emerging Asian currencies' recent bullish trend,
dealers and analysts said.
In line with that view, many of the regional units recovered
some of their early Monday losses.
"It is supply-push rise in oil prices and inflation which
central banks can't control. Demand-push inflation is still
weak," said BNP Paribas currency strategist Thio Chin Loo in
Singapore, adding that the weakness in emerging Asian currencies
would provide investors with chances to buy them on dips.
A senior dealer at a Malaysian bank in Kuala Lumpur said he
has not spotted major funds pulling money out of Asia yet.
Investors stayed relieved as the euro was supported by the
European Central Bank's three-year, low interest loans facility,
he added.
"With higher oil prices, economic growth will suffer and
inflation will go higher... But if major funds pull out, where
would they put their money?" the dealer said.

CURRENCIES VS U.S. DOLLAR
Change on the day at 0400 GMT
Currency Latest bid Previous day Pct Move
Japan yen 81.23 81.21 -0.02
Sing dlr 1.2565 1.2560 -0.04
*Taiwan dlr 29.572 29.582 +0.03
Korean won 1128.00 1125.80 -0.20
Baht 30.43 30.35 -0.26
Peso 42.99 42.84 -0.35
Rupiah 9100.00 9040.00 -0.66
Rupee 48.96 48.94 -0.04
Ringgit 3.0160 3.0125 -0.12
Yuan 6.3010 6.2978 -0.05

Change so far in 2012
Currency Latest bid End prev year Pct Move
Japan yen 81.23 76.92 -5.31
Sing dlr 1.2565 1.2969 +3.22
Taiwan dlr 29.572 30.290 +2.43
Korean won 1128.00 1151.80 +2.11
Baht 30.43 31.55 +3.68
Peso 42.99 43.84 +1.98
Rupiah 9100.00 9060.00 -0.44
Rupee 48.96 53.08 +8.43
Ringgit 3.0160 3.1685 +5.06
Yuan 6.3010 6.2940 -0.11
* Financial markets in Taiwan are closed for public holidays
until Tuesday.

(Reporting by Jongwoo Cheon; Editing by Richard Borsuk)

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