SINGAPORE: The South Korean won and the Thai baht hit multi-month lows against the dollar on Wednesday, weighed down by expectations of a faster pace of US interest rate increases after Donald Trump becomes president on Jan. 20.
The Thai baht hit a trough of 36.076, falling to levels last seen in January. The won touched 1,196.3 per dollar, its lowest level since March.
As the won slipped, a South Korean official in charge of foreign exchange markets cautioned traders about pushing the currency too low, highlighting the 1,200 level per dollar level as a key area to watch.
Such remarks probably reflect concerns about the risk that a weakening won could spur capital outflows from South Korean assets, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
"For South Korea, won weakness might normally be seen as being desirable," Okagawa said, noting the export-dependent nature of the country's economy.
"But the problem is that it could lead to trouble if that (won weakness) were to be accompanied by fund outflows from bonds and equities," he added.
The Philippine peso languished near an eight-year low hit in late November of 50.000, having matched that trough on Tuesday. The peso last stood at 49.980.
Emerging Asian currencies have declined broadly since early November, as the dollar and US bond yields jumped on expectations that President-elect Donald Trump's proposals for infrastructure spending and tax cuts will boost economic growth and inflation.
Such rises in US bond yields can reduce the attractiveness of investing in emerging markets and trigger capital outflows from such countries.
Asian currencies have come under renewed pressure after the US Federal Reserve raised interest rates last week for the first time in a year, and also signalled three hikes in 2017.
EMERGING MARKET OUTFLOWS
Data from the Institute for International Finance (IIF) showed non-resident investors have pulled a total of $23 billion from emerging market portfolios since early October, including $18 billion after the US presidential election.
The IIF tracks Indonesia, India, Korea, Thailand, the Philippines, South Africa, Brazil and Hungary.
Nearly half of the $18 billion in outflows from emerging market assets since Nov. 9 were from Indian equities and bonds, the IIF said, adding that South African and Thai securities also saw particularly marked outflows.
Korean equities were the only asset tracked by the IIF to have recorded inflows during this period, it added.
THAILAND'S CENTRAL BANK
Thailand's central bank is expected to leave benchmark interest rate steady for a 13th straight meeting at its policy review on Wednesday despite a slow economic recovery, according to a Reuters poll.
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