Asian currencies weak

The Philippine peso was volatile and other Asian currencies stayed in narrow ranges on Wednesday, awaiting clarity on the dollar's direction from US economic data later in the week. Most currencies had hit multi-month highs last week, but pared some of those gains this week as market participants stopped selling the dollar, taking it off record lows.
Holidays in South Korea and China also dampened trading in Asian currencies, and the trend in stock markets too was mixed. "I think the market has become a lot more optimistic and, therefore, we have seen some moves to put on more risk again over the last few weeks," said UBS strategist Nizam Idris.
But investors were worried things could still deteriorate, he said, adding, "there hasn't been enough data to tell us for sure what's the final impact on the US economy".
The US Institute of Supply Management's indicator on the service sector is due on Wednesday and non-farm jobs data is due on Friday. Uncertainty about this data and what it will mean for US interest rates has helped the dollar rebound from record lows against the euro and a basket of major currencies this week.
In addition, Asian currencies have been undermined by fears regional central banks will intervene, forcing them to retreat from multi-month highs. The peso hit 45.15 per dollar at its weakest point on Wednesday, losing half a percent from the previous close. It subsequently rallied back to 44.86 and then fell again.
Philippine shares rose 2.5 percent, making them the strongest gainers in the region. "Manila shares may be pricing in BSP easing, whether as early as tomorrow or at the 15 November meeting," Westpac Bank said in a note, referring to the Philippine central bank's policy review on Thursday.
"A sustained improvement in inflation, a firm peso and the Fed's 18 September easing do make the case for a cut in the overnight borrowing rate," Westpac Bank said. The Indonesian rupiah stuck to a narrow range around 9,100 per dollar and the Malaysian ringgit fell to 3.4160 per dollar.
Traders and analysts said they viewed the correction as temporary and would look to rebuild their long positions in some of the Asian currencies. "Funds have been flowing into Asian equity markets," said Alvin Cheng, a trader at Fortis Bank in Hong Kong.
"Short-term, I like the Korean won and Singapore dollar. But I hear more flows are coming into high-yielding currencies again, so the Indonesian rupiah will be my next favourite," he said. Data from Nomura International showed India and Indonesia have seen a substantial recovery in foreign investment inflows after a slump during the credit market turmoil in August. Since mid-August, Indonesia had received net foreign portfolio flows of $405 million, accounting for 0.9 percent of market capitalisation, Nomura said.
The Jakarta stock exchange index hit a record high on Tuesday, although it weakened on Wednesday. But while stock markets globally have continued to rise this week, currency markets have been beset with worries over what policy makers from the Group of Seven nations will decide when they meet in mid-October.
Comments from European officials against the strength of the euro have been partly responsible for tempering the dollar's fall. However, J.P. Morgan Chase said in a note that investor unease with selling the dollar and concern over intervention in Asia would not last.
"We view these as temporary market adjustments to recent dollar/Asia declines. While investor caution could persist ahead of the US jobs data, the bias for the ringgit and the Singapore dollar remained strong, J.P. Morgan said. The Singapore dollar is off a 10-year high of 1.4738 per US dollar struck on Monday. It has been boosted by a growing view that inflationary pressures will prompt the Monetary Authority of Singapore (MAS) to stick to a modest tightening stance when it reviews monetary policy next week.