The Taiwan dollar fell while other Asian currencies recovered on Thursday as concerns about the potential impact of Hurricane Rita on the United States undermined the US dollar.
The Taiwan dollar fell to a 10-month low of 33.155 per dollar, hurt by a stock market that closed at its lowest in nearly 4 months and net foreign portfolio selling of Taiwan stocks to the tune of T$12.4 billion ($374 million).
Other Asian currencies firmed as the US dollar's rally fizzled after Hurricane Rita developed into a risky Category 5 storm threatening the US Gulf Coast and endangering oil plants.
The US dollar had firmed earlier this week as the Federal Reserve raised rates for the 11th consecutive time since June 2004.
Rita's threat pushed US light crude prices up to about $67.69 a barrel, just shy of Wednesday's 3-week high of $68.27.
The yen rallied, following early weakness on data showing a sharp contraction in Japan's trade surplus in August, and the euro bounced further away from seven-week lows.
The Korean won was about a quarter of a percent higher, around 1,027 a dollar. The Indonesian rupiah rose to about 10,200 a dollar from Wednesday's two-week low of 10,255.
"Growth concerns are shifting to the US and dollar is weaker," said Thio Chin Loo, BNP Paribas's currency strategist.
Even though the Fed had not indicated its tightening cycle was nearing an end, traders and investors believed monetary policy in the United States would not be tightened at a steady pace if Hurricane Rita inflicted a lot of damage, she said. "As a result, there is still a feeling that the Fed could pause if need be," Thio said.
Although Asian currencies were being supported by the yen's resilience, backed by improving economic fundamentals and hopes for big reforms in Japan, they would be at risk from rising oil, she said.
"With fears of a growth slowdown at the back of their minds, investors are not pursuing emerging market currencies aggressively at this stage," Thio said.
Analysts at DBS Bank said commodity currencies such as the Canadian and Aussie dollars would outperform as defensive trades against Hurricane Rita while Asian currencies would underperform.
"The hurricane should renew worries about a US-led global slowdown, while resurgent oil prices are likely to bedevil rupiah and Indian rupee," DBS said in a note.
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