Asian currencies: stock falls weigh on high-yielders

High-yielding Asian currencies fell on Thursday as falling stocks impelled investors to trim their positions, but the Chinese yuan rode on the dollar's weakness and helped underpin investor sentiment. The Indonesian rupiah dropped briefly as far as 9,165 per dollar, down half a percent from late Asian trade on Wednesday, before rising to find support around 9,155.
The Philippine peso slipped as low as 43.60 per dollar before bouncing back to 43.30 per dollar, a tad weaker than Wednesday's close. "I think the market is shrugging off the risk aversion scare again - the focus now is that capital flows are still coming into the country," said a trader in Manila.
Analysts expect the peso, the best performer in Asia so far this year against the dollar, to continue its gains on sustained inflows of remittances from abroad. The peso has gained 13.3 percent this year, including about 6 percent since the Fed cut its key interest rate by half-point on September 18, surpassing the Indian rupee's gains of 12.5 percent.
The rupee eased to 39.33 per dollar from 39.185 on Wednesday, just short of a nine-and-a-half-year high of 39.18, after the ceiling on market stabilisation bonds was raised to give the central bank more fire power to limit the currency's gains.
The Singapore dollar was thinly traded owing to a holiday and markets in Malaysia were shut for a holiday. The US dollar stayed near a record low against the euro and remained feeble against other major currencies, after the Dow Jones industrial average tumbled 2.6 percent on Wednesday on renewed jitters about the housing market.
MSCI's measure of Asia Pacific stocks excluding Japan shed 3 percent on Thursday. Analysts expect most Asian currencies to make further gains, supported by capital inflows into Asia as the Federal Reserve is widely expected to cut interest rates further to shield the world's largest economy from the credit market woes.
But downside risks also remain for Asian currencies, including jitters about the US credit market and currency intervention by Asian central banks. "Risk appetite is obviously the driver. The dollar finds some support, but we don't think it will track much higher," said Ben Simpfendorfer, currency strategist at Royal Bank of Scotland.
The South Korean won fell as far as 908.6 per dollar, as the central bank held its key interest rate steady at 5.0 percent for the third month in a row, as widely expected.