Asian currencies weakened slightly on Wednesday as a light recovery in some stock indexes failed to offset investor scepticism over the US government's bailout package for the financial sector. Concerns over whether the $700 billion bailout package for troubled assets will be approved by the US Congress. The cost of that huge debt and its effectiveness weighed on sentiment.
The Korean won fell half a percent to near 1,155 per dollar while lower-risk Asian currencies such as the Singapore dollar were almost unchanged. Others currencies, such as the rupiah and Indian rupee fell by about 0.1 to 0.2 percent.
While the US dollar benefited from news Warren Buffett's investment company was picking up a stake in the Goldman Sachs Group, there seemed to be little appetite for risk in the emerging markets. "The bailout may have muted effect... global investors stay sidelined," said a Jakarta-based trader. "It's year-end mate - protect your profit if you have any!"
Morgan Stanley wrote in a note to clients that the US package of measures would improve liquidity in Asia. "The US policy response to the global financial market stresses has provided near-term support for the Asia ex-Japan currencies," Morgan Stanley wrote in a note to clients. "But macro weakness, falling interest rate support and banking concerns have tilted the Asia ex-Japan fundamentals downward." Morgan Stanley said the won, rupee and Vietnamese dong were the most vulnerable to such weakness.
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