Most emerging Asian currencies lost ground on Thursday as a global bond rout lifted government bond yields across the region. The Vietnamese dong slid after the central bank devalued the currency for the second time this year to support exports and curb import demand, and the resulting trade deficit. South Korea's won led regional losses on selling from offshore funds as foreign investors dumped treasury bond futures. Finance Minister Choi Kyung-hwan also warned of intervention to stem the currency's strength, especially against the yen.
The Indonesian rupiah fell to the weakest in almost seven weeks as foreign banks sold the currency with most government bond prices down. Sliding Thai government bond prices and weaker consumer confidence sent the baht to a five-year low. The global bond rout started from a surge in the euro zone bond yields, especially German Bunds, on easing deflation worries after improving European data. That hurt US Treasuries and Japanese government bonds.
"The sell-off in Asian currencies is part of the overnight deleveraging process that hit bonds, equities and the dollar," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur. He expected the trend to contint until the release of US non-farm payrolls data for April on Friday. The won lost as much as 1.0 percent to 1,090.7 per dollar, its weakest since April 16.
South Korea's finance minister said a weaker yen has raised concerns regarding its impact on the country's exports, raising caution over possible intervention. Still, the South Korean currency pared some of its earlier losses as exporters looked for opportunities to buy on dips during the slide. The rupiah fell 0.5 percent to 13,097 per dollar, its weakest since March 20. The 10-year yield spiked to 8.018 percent, its highest since December 22.
Indonesia's central bank was spotted intervening to support the worst-performing Asian currency so far this year, traders said. "I am afraid that BI will defend 13,100 with state banks already at 13,090 on the offer side now," said a Jakarta-based currency trader, referring to Bank Indonesia. The baht fell 0.2 percent to 33.37 per dollar, its weakest since January 2010. Five- and 10-year government yields jumped. Thai consumer confidence fell for a fourth consecutive month in April, a survey showed earlier.
Deputy Prime Minister Pridiyathorn Devakula also said the baht could be weaker after the central bank's measures to encourage more capital outflows. The ringgit fell with government bond yields higher and as some funds cut long positions in the currency against the euro. The Malaysian currency pared some of earlier losses as the country posted unexpected exports growth in March on solid shipments of electronic products. Investors were awaiting the result of the central bank's policy meeting later in the day. Bank Negara Malaysia is expected to hold its benchmark policy rate steady, as inflationary pressures and currency risks are contained.
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