Emerging Asian currencies dropped on Thursday as the US Federal Reserve's outlook for rising rates stoked concerns that regional assets may lose some of their high-yield appeal. The Malaysian ringgit fell to a near four-month low ahead of the central bank's monetary policy review later in the day. Economists were evenly split between Bank Negara raising interest rates again and holding steady.
South Korea's won and the Philippine peso fell to their weakest level since April. The Indonesian rupiah slid to a near three-month low. The Fed on Wednesday suggested it could raise interest rates faster than expected when it starts increasing, although it renewed its pledge to keep borrowing costs near zero for a "considerable time."
The dollar rose to a 14-month high against a basket of major currencies. The greenback hit a six-year peak versus the yen. Emerging Asian currencies have fallen this month on concerns that the US central bank may bring forward its timing of rate hikes as the world's top economy showed a picked in momentum.
"It was only a small shift with a dovish comment and still USD strengthened," said Sean Yokota, head of Asia strategy for Scandinavian bank SEB in Singapore, referring to the Fed's Wednesday's stance. "People still aren't positioned for a stronger USD and higher US rates and more Asia FX weakness will come through." The ringgit fell 0.8 percent to 3.2425 per dollar, its weakest since May 8. The Malaysian currency fell against the Singapore dollar.
"Inflation pressures are edging higher but not at an alarming rate," said Jonathan Cavenagh, senior FX strategist with Westpac in Singapore. The ringgit's one-month non-deliverable forwards could fall to 3.2800 per dollar if it weakens past the current level of 3.2500, he added. The NDFs on Wednesday closed at 3.2448. The won lost as much as 0.8 percent to 1,043.4 per dollar, its weakest since April 16, as offshore funds sold it.
Bank of Korea Governor Lee Ju-yeol expressed concerns over the won's strength against the Japanese currency as the two countries compete in exports markets. Local exporters bought the won for settlements on dips, limiting its losses. The currency has a 200-day moving average at 1,043.2.
The rupiah lost 0.7 percent to 12,035 per dollar, its weakest since June 27, on selling from foreign-backed local banks. The official Jakarta Interbank Spot Dollar Rate (JISDOR), which the central bank launched last year in an effort to manage exchange rate fluctuations, was fixed at 12,030 rupiah per dollar, weaker than the previous session's 11,908. The rupiah pared some of its earlier losses as the central bank was spotted intervening to support the currency. Foreign banks purchased the rupiah, which some traders said was possibly done on behalf of the central bank.
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