SINGAPORE: Most emerging Asian currencies slumped on Wednesday, as growing Brexit fears dampened risk appetite while investors were awaiting clues from the US Federal Reserve on the timing of the next interest rate increase.
The yuan hit a more than five-year low after China's central bank set its daily guidance rate at its weakest since January 2011. The renminbi turned firmer later and helped regional peers recover some losses, as traders adjusted bearish bets ahead of the Fed's policy decision.
South Korea's won fell to a near two-week trough, while the Indonesian rupiah slipped to its weakest in more than a week.
More investors shunned riskier assets as latest polls suggest a higher chance of Britain exiting the European Union at a June 23 referendum.
"Asia FX is being cautious in fears of Brexit as polls continue to swing in favour of the 'Leave EU' camp," said Christopher Wong, a senior FX strategist for Maybank in Singapore.
"I don't think the risks have fully priced in. Asia FX will stay even softer on uncertainty if it happens," Wong said, adding his house view remains for the UK to stay in the EU.
The immediate focus was the Fed's monetary policy decision later in the day. The US central bank is widely expected to stay pat this week, but investors were keeping an eye on any signal for when the Fed will raise interest rates again.
Maybank's Wong said emerging Asian currencies could find short-term support from the Fed.
"Regional currencies such as IDR, PHP and MYR may see some relief in case of an upbeat assessment of the US economy, deferred decision to hike in June and reiteration of gradual pace of tightening," he said, referring to the rupiah, the Philippine peso and the Malaysian ringgit.
WON
The won fell as much as 0.6 percent to 1,180.0 per dollar, its weakest since June 3, after China's central bank fixed its official midpoint for the yuan at its lowest in nearly 5-1/2-years.
The South Korean currency pared much of its earlier losses as the renminbi stabilised and China's stocks jumped.
South Korea's exporters also bought the won for settlements around the session low, where offshore funds hesitated to sell the currency, traders said.
RUPIAH
The rupiah slid nearly 0.5 percent to 13,415 per dollar, its weakest since June 6, as most Indonesian government bond prices fell.
The official Jakarta Interbank Spot Dollar Rate, which the central bank introduced in 2013 to manage exchange rate fluctuations, was fixed at 13,398, weaker than the previous 13,273.
Indonesia's central bank started a two-day monetary policy meeting to be concluded on Thursday.
Bank Indonesia is expected to keep its benchmark policy rate unchanged, although a significant minority predicted a cut after the central bank governor flagged a possible easing as soon as this month, a Reuters poll showed.
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