Singapore dollar, Malaysian ringgit inch up on short-covering

REUTERS - The Singapore dollar and the Malaysian ringgit edged up on Tuesday as investors further reduced bearish bets on weakened views that the United States Federal Reserve may start scaling back its stimulus, while most emerging Asian currencies barely changed.

The Indian rupee weakened to within touch of a record low, pressuring bonds, although caution over potential intervention to support the currency limited its downside.

The Singapore dollar advanced on demand from leveraged funds. The ringgit gained as Malaysian government bond yields fell.

The US dollar slid further as data showed on Friday that US employers slowed the pace of hiring in July, raising expectations that the Fed may wait until late this year before reducing its bond-buying programme.

"If the dollar continues to lose traction globally, Asian currencies may continue to reclaim lost ground, given also that the net portfolio inflow environment has continued to improve in recent sessions," OCBC Bank said in a client note.

Still, emerging Asian currencies' gains were limited as some traders stayed cautious over the Fed's possible tapering and on weaker regional stocks.

Dallas Fed President Richard Fisher said on Monday the US central bank is nearer to dialing back its quantitative easing after the unemployment rate dropped last month.

Leveraged funds lifted the Singapore dollar, but investors hesitated to push the currency higher than 1.2640 to the US dollar, traders said.

Based on the charts and technical factors, traders said the greenback will find a trendline support around the level.

"Everybody is looking to buy the US dollar there," said a foreign bank trader in Singapore.

For more gains in the Singapore dollar, it needs to strengthen past the 1.2630-1.2640 level first and clearly breach 1.2600, the trader said.

"But nobody expects that for the time being," he added.

Join ST's Telegram channel and get the latest breaking news delivered to you.