Ringgit leads Asia FX losses

The Malaysian ringgit led losses among emerging Asian currencies on Tuesday as the dollar's broad strength caused investors to book profits from recent gains in the regional units against the greenback. Offshore funds sold the ringgit and the South Korean won - two of the best performing emerging Asian currencies in August. The Philippine peso fell as local banks covered short positions in the dollar.
Last month, most regional units rose on expectations of more capital inflows, anticipating that the European Central will ease monetary policy further, which as a side-effect would allow investors to raise money cheaply to invest in higher-yielding emerging markets. The greenback firmed as the 10-year US Treasury yield rose. The euro slipped close to a one-year low ahead of the European Central Bank's policy meeting on Thursday. The yen also slid to its weakest in around eight months.
"It is inevitable to see corrections in Asian currencies as the dollar's strength is accelerating due to the euro's weakness," said Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul. "But they would stabilise once the ECB takes more steps." The ringgit fell as investors covered short positions in the dollar. The Malaysian currency eased in non-deliverable forwards on selling from leveraged funds, traders said. "Nobody wants to be short dollar. There is only one game in town, buying the dollar," said a senior Malaysian bank trader in Kuala Lumpur.
Still, the trader planned to buy the ringgit around 3.1700 per dollar and 3.1800 amid expectations that Malaysia's central bank could raise interest rates. Those expectations helped the ringgit outperform other emerging Asian currency in August, to notch a 1.5 percent gain against the dollar. The won turned weaker after hitting a near two-month high as selling from offshore funds offset demand from exporters. Earlier, the won gained 0.2 percent to 1,011.1 per dollar, its strongest since July 10.
The South Korean currency reversed the direction as offshore funds' selling caused local speculators to cut long positions. Investors also grew cautious over possible intervention by the foreign exchange authorities to curb the won's appreciation as the currency hit a fresh eight-year high of 9.6842 against the yen. The peso fell as local interbank speculators covered short positions in the dollar. Offshore funds also sold the peso, but less aggressively than domestic speculators, traders said. On Monday, the Philippine peso rose to its strongest in more than a month on demand from offshore funds.