Asian currencies weakened a tad on Monday after a stronger-than-expected US jobs report for July revived expectations that the Federal Reserve would raise interest rates throughout the year, boosting the dollar.
The South Korean won and Taiwan dollar both lost almost half a percent while the Singapore dollar weakened almost a third of a percent, taking their cue from the Japanese yen.
The yen dropped as much one percent at one stage to 112.62 per dollar, dragging other Asian currencies lower, after Japanese Prime Minister Junichiro Koizumi suffered a defeat in parliament on his bill to privatise the postal system and seemed set to call a snap general election.
But the yen, Singapore dollar and other Asian currencies recovered some of the losses as traders said the parliamentary setback was expected and instead focused on the improving outlook for Asian exports as the US economy accelerated.
"We saw some foreign equity selling in parts of the region but overall it seems there has been a limited reaction," said Craig Chan, a currency strategist at Royal Bank of Scotland in Hong Kong, referring to the rejection of Koizumi's postal bill.
"A lot of it was already priced in. If the dollar is bid higher, it's a good opportunity to sell against Asian currencies. The cyclical story is quite favourable for Asia. You've got indicators from the US pointing to exports picking up."
Data on Friday showed US non-farm payrolls rose a stronger-than-expected 207,000 in July, reinforcing views that the world's largest economy was accelerating in the second half.
Claudio Piron, a currency strategist at J.P. Morgan Chase Bank in Singapore, said although a stronger US economy should help Asian exports in coming months, the surprisingly strong US employment report could lift the dollar against Asian currencies in the near term.
Record high oil prices also dampened sentiment for Asian stocks and currencies. Benchmark New York crude oil futures climbed to a record $62.90 per barrel on Monday.
China's reluctance to let its currency, the yuan, appreciate further after July's 2.1 percent revaluation also clouded the outlook for rival Asian currencies.
Ba Shusong, a vice director with the State Council's Development Research Centre, told Reuters that the authorities would need to study the impact of last month's revaluation for three to six months before making any further move.
The yuan weakened on Monday to a low of 8.1100 per dollar in local trading - the level it was revalued to on July 21 - from Friday's closing level of 8.1037. Yuan non-deliverable forwards also pared back expectations of further near-term appreciation in the currency.
The yuan has risen by a maximum of just 0.09 percent in the 12 sessions since it was revalued.
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