EM ASIA FX-Asia FX dips on Europe political, economic woes

SINGAPORE (Reuters): Most emerging Asian currencies dipped on Tuesday with the won briefly breaking through a technical support, as political uncertainty and economic slowdown in Europe added to fears over its debt crisis, keeping investors away from risk assets.

Regional units are likely to stay weak as the euro zone is beset by political issues, which may put a brake on members' austerity measures. Dutch Price Minister Mark Rutte on Monday tendered his government's resignation in a crisis over budget cuts, creating a political vacuum in one of the euro zone's most stable countries, a day after the first-round vote in France's presidential election.

The Netherlands, which Moody's says is facing a "credit negative" event due to the collapse of the governing coalition over austerity measures, is scheduled to sell up to 2.5 billion euros of two- and 25-year bonds later on Tuesday. The euro zone's economic picture became gloomier, with data showing its business slump deepened at a far faster pace than expected in April. BNP Paribas currency strategist Thio Chin Loo in Singapore said political uncertainties in Europe may pose a serious risk for emerging Asian currencies.

She recommended "buy the U.S. dollar call for protection just in case Europe gets worse."

But some traders looked to buy emerging Asian currencies on dips, believing that their long-term economic outlook remains brighter than those of other markets. If the Bank of Japan eases monetary policy more on Friday, regional currencies may see demand again as investors are likely to use the cheap yen to buy those units, they added.

"So far, the euro zone politics and economic worries have not seemed to have much impact on Asia ex-Japan currencies," said a senior dealer at a Malaysian bank in Kuala Lumpur, adding that this indicates "Asia is immune to the euro zone troubles."

"Funds are not getting out of Asia and more will come into Asia eventually. So I will sell dollar/Asia on rallies," the dealer said. WON

Dollar/won rose to as high as 1,142.7, trying to gain a foothold above the down trendline from 1,185, the high of Dec. 19, which currently stands at 1,140.8. A sustained hold above the trendline should result in an initial rally to 1,144.9, the high of April 12, and later towards critical resistance in the 1,148-1,149 area - the 50 percent Fibonacci retracement of its December-March slides.

But the pair ended the local trade at 1,140.8 as South Korean exporters took its gain as a chances to sell it for settlements, while investors stayed cautious over possible dollar-selling intervention by the foreign exchange authorities.

The authorities have not been spotted in the market yet, dealers said. RUPEE

Dollar/rupee hit a three-and-a-half month high, but investors were reluctant to add long positions in the pair as it is approaching 52.95-53.00 - the 76.4 percent retracement of its December-February declines.

Its 14-day Relative Strength Index (RSI) rose to 72.1, above the 70 threshold, indicating the pair is in an overbought territory. A 2.5 percent gain in the pair in less than a week, with other dollar/Asian currencies relatively steady, may prompt investors to take profits. India's central bank may also sell dollar/rupee for intervention.

Analysts said short-term traders should clear long positions around 52.85-52.95 and wait for better levels to buy it on dips. TAIWAN DOLLAR

U.S. dollar/Taiwan dollar eased on foreign investors' inflows, with trading subdued.

But the island also saw outflows of foreign funds and the pair's downside was limited, dealers said.

Local importers placed U.S. dollar bids around 29.40-29.45, dealers said. Foreign investors sold a net 78.3 million Taiwan dollars ($2.65 million) in the island's stock market.