The dollar hovered near a two-week low against a basket of currencies on Monday and stocks were pinned in tight trading ranges as weak data and the escalating Greek debt crisis kept market players on the sidelines.
European authorities are likely to deliver their verdict this week on Greece's faltering drive to bring its budget deficit under control after a recent spell of bad news raised the spectre of a default.
Against a basket of currencies, the dollar was trading near the 74.9 line, just shy of a two-week trough hit in the previous session. It pulled away from a record low of 0.8457 against the Swiss franc
Holidays in the United States and the UK on Monday also kept volumes thin.
A batch of weak data has also raised questions on whether the U.S. economic recovery is faltering, raising expectations that authorities may keep interest rates at zero well into 2012, undermining the dollar's appeal.
Such hopes of ultra low U.S. interest rates even with the looming end of the Federal Reserve's USD 600 billion bond purchase plan have sent investors running into Asian debt.
Year-to-date volumes of USD 47.4 billion in bonds sold in dollars, euros and yen from Asia ex-Japan, ex-Australia is already more than half of USD 83.6 billion transacted in all of 2010. Morgan Stanley projected that at the current pace the annual tally could end up in excess of USD 100 billion.
London-listed Indian mining company Vedanta Resources last week priced USD 1.65 billion worth of five- and 10-year bonds, which marked the largest high-yield bond out of Asia.
That bullishness hasn't been restricted to such bonds only.
Local currency debt have also emerged as a favorite for after January's selloff with net foreign ownership in Indonesian rupiah bonds rising to a record.
Measured in dollar-adjusted terms, total returns for Indonesian local bonds are about 11% so far this year, compared to about 2.3% for the broader JP Morgan GBI-EM Asian index, according to Thomson Reuters data.
Southeast Asia benefits
While credits had yet another roaring month, equity indices across the region were mostly down in May, led by Chinese shares which are set to post a 7% drop.
Southeast Asian markets were the clear outperformers with Malaysia and Indonesia among the leaders, posting marginal gains for the month, as authorities demonstrated a greater urgency to tackle rising prices after an inflationary scare in January.
"In the past these (Southeast Asian) markets were very susceptible to inflationary pressures, but due to better economic management, they are not so much of a hot potato for investors nowadays," said Khiem Do, chairman of Asia multi-asset team at Barings Asset Management in Hong Kong.
"As long as North Asia continues to trade in a range and is dogged by inflationary pressures, these markets will continue to benefit," he said.
For the day, Japan's Nikkei and Australia were broadly flat. The MSCI index of Asia Pacific stocks outside Japan was a shade higher after falling for five consecutive weeks.
In currency markets, the euro dipped as investors covered short positions in the dollar following a slide in the US currency late last week.
The euro fell to USD 1.4285 , having pulled back from resistance near USD 1.4327, its 55-day moving average.
The single currency, which has bounced off of a two-month low of USD 1.3968 hit a week ago on trading platform EBS, also faces resistance near USD 1.4369, the top of the cloud on the daily Ichimoku chart, a technical analysis tool popular among traders.
The greenback's recent losses was also compounded by a slide in Treasury yields.
US Treasury bond yields held near six-month lows with 10-year yields at 3.07% compared to 3.29% at the start of the month.
