Most emerging Asian currencies fell on Thursday as China's yuan hit a six-year low in offshore markets, with the dollar just shy of this week's nine-month peak amid solid expectations of a US interest rate hike in December. The offshore renminbi touched 6.7921 per dollar, its weakest since October 2010, while spot yuan in the onshore market eased after the People's Bank of China set its daily guidance rate weaker than the previous session.
"The market is starting to get a bit nervous about further weakness in the yuan, which could lead to greater capital outflows," said Stephen Innes, senior FX trader for FX broker OANDA in Singapore. "If this continues at a pace beyond what virtually everyone forecast, I suspect there will be a spillover to the regional currencies," Innes said.
Singapore's dollar and South Korea's won are seen as more vulnerable due to their lower yields and sensitivity to China's currency policies, he added. The won led regional losses, hitting a 1-1/2-week low, as foreign investors continued to sell local bonds.
The Philippine peso slumped on equity outflows with President Rodrigo Duterte repeating threats to end Manila's military pacts with the United States. Malaysia's ringgit slid as lower crude prices underscored concerns over oil and gas revenues. The won lost 0.8 percent to 1,143.0 per dollar, its weakest since October 17.
Foreign investors on Wednesday cut a net 247.3 billion won ($216.6 million) worth of South Korea's bonds, increasing the total of their net selling in the first 26 days of this month to 546.7 billion won, preliminary data from a financial regulator showed. Among offshore sellers, Thailand's central bank and a major US fund manager sold the won to repatriate funds, a market expert said, asking not to be identified due to the sensitivity of the matter.
Bank of Thailand officials were not available for comment. The central bank's selling came amid concerns that Thai financial markets may have been hurt by the death of King Bhumibol Adulyadej earlier this month. The US fund has been a big seller of South Korea's bonds this year, especially short-term notes, according to bond traders and analysts in Seoul.
South Korea's bonds have been under pressure from dimming expectations of a further central bank rate cut and doubts over more appreciation in the won. Still, South Korea's exporters were lined up to buy the won on dips for month-end settlements, limiting its losses. Foreign investors were also set to become net buyers in Seoul shares.
The peso slid 0.4 percent to 48.54 per dollar, its weakest since October 17, with foreign investors net sellers in Manila's stock market over the previous three consecutive sessions. The Philippine currency came under further pressure from month-end corporate dollar demand, traders said.
A senior Philippine bank trader said tighter dollar funding conditions onshore had pressured short-dated dollar/peso swaps. "Some may actually be covering their USD liquidity needs on the spot," said the trader, adding the peso could weaken to 48.70. The trader, however, saw limited downside in the Philippine currency, saying local investors were not worried about Duterte's anti-US stance as it has not yet translated into policy.
The ringgit skidded as oil prices stayed below $50 a barrel as doubts over Opec's ability to organise a co-ordinated production cut weighed on markets. The Malaysian currency was also pressured by month-end corporate dollar demand. But most government bond prices rose, limiting the ringgit's downside.
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