Peso leads Asia FX losses

The Philippine peso hit a five-month low on Thursday, leading weakness among emerging Asian currencies, as the dollar hit a four-year high against major currencies with the euro slumping. The peso underperformed its regional peers after the country's July electronics imports reported the steepest drop in more than two years, indicating an economic slowdown.
South Korea's won fell on growing caution over possible intervention by the foreign exchange authorities to curb its strength against the yen. The South Korean currency earlier hit a six-year peak to the Japanese unit. The dollar index, a gauge of the greenback's performance against a six major currencies, rose to its highest since July 2010.
That came as the euro fell to a 14-month low versus the dollar as European Central Bank President Mario Draghi said on Wednesday monetary policy will be kept loose for as long as it takes to push ultra-low inflation back up towards the two percent level. "It is more difficult for Asian currencies to strengthen against a firm USD," said Frances Cheung, head of Asian rates strategy at Credit Agricole CIB in Hong Kong. Emerging Asian currencies have benefited from expectations that investors would borrow cheap euros to buy higher-yielding assets in the region.
But, Cheung said that while easier monetary policies by the ECB and the Bank of Japan may limit losses in emerging Asian currencies, the impact may not be as supportive on the regional units as initially hoped. Money from the ECB may focus more on buying peripheral bonds or domestic bank loans, while Japanese investors do not like to buy other Asian assets, Cheung said. Japan's investors prefer safer assets such as US Treasuries.
"We have to be conservative at first (on emerging Asian currencies)," she added. The peso lost as much as 0.5 percent to 44.675 per dollar, its weakest since April 25. Philippine electronics imports in July fell nearly 30 percent from a year earlier, the steepest drop since March 2012, data showed earlier.
That indicates weaker electronics exports going forward as most imports products are raw materials to produce electronics shipments. The peso is likely to stay under pressure from the dollar's broad strength, traders said. "I'd still want to buy the dollar/peso on dips," said a senior Philippine trader in Manila, adding he would buy the pair for a target of 44.70.
The won eased again on selling from offshore funds and its weakness in non-deliverable forwards markets. The South Korean currency pared initial losses thanks to demand from exporters for month-end settlements. The won turned weaker against the yen after strengthening to 9.5069, its strongest since August 2008.