The South Korean won and Malaysian ringgit fell on Friday on worries fiscal tightening would hurt Europe, but the yuan edged up in offshore markets amid renewed speculation of a shift in China's currency policy. The baht slipped slightly against the dollar but was surprisingly resilient despite fresh violence between anti-government demonstrators and security forces in Bangkok.
The euro steadied near 14-month lows against the dollar on concerns that rigorous fiscal tightening in Europe would dampen an already-weak recovery. The New Zealand dollar was on the defensive after sluggish retail data reaffirmed expectations of a subdued recovery in the country, which will temper expectations of interest rate hikes this year.
The won dropped as much as 0.9 percent to 1,137.7 per dollar, but it later cut losses. The won has lost 2.5 percent from late April due to jitters over Greece's debt woes. Analysts at Morgan Stanley expect the won to regain steam in line with South Korea's improving economic fundamentals, but they trimmed their outlook due to the global turmoil.
"The short-term price action is admittedly uncertain, but we think that the won will generally recover in tandem with a rebound in global risk appetite," the analysts said in a note. The won's valuations were not as cheap as they used to be while the country's balance of payments surplus was moderating.
The ringgit shed nearly half of a percent to 3.2020 per dollar at one point, tracking weaker local stocks. The Thai baht eased a fifth of a percent to 32.38 per dollar, as Thai troops fired tear gas as they advanced towards a protest checkpoint following overnight fighting that killed one and wounded 11, including a rogue general. The baht has gained 3 percent against the dollar this year.
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