The Chinese yuan slipped a six-month low and the Taiwan dollar hit a four-year trough on Wednesday, as the dollar enjoyed broad demand after data showed the US economy in much more sturdier shape than earlier thought. The Taiwan dollar fell to 31.894 on the greenback, its lowest level since September 2010, pressured by US dollar buying by Taiwanese importers as well as foreigners.
Market participants said they were now wary of intervention from the Taiwan's central bank to prevent the Taiwan dolllar from falling too rapidly The Chinese yuan weakened to 6.2325 per dollar, its lowest level since late June. The recent weakness in the yuan as well as the Japanese yen could weigh on Asian currencies next year and prevent any significant rebound, said Sim Moh Siong, FX strategist for Bank of Singapore.
"The competitive challenge from yen weakness is likely to reassert its influence on Asian currencies," Sim said. The drag on emerging Asian currencies could be amplified by the recent decline in the Chinese yuan, he added. "I think that will increase the incentive to tolerate currency weakness," Sim said, referring to the stance of Asian policymakers toward their domestic currencies.
Revised data on Tuesday showed that the US economy grew at a 5.0 percent clip in the third quarter, its quickest pace in 11 years, prompting markets to bring forward the timing of a likely hike in US interest rates and giving a lift to the dollar.
SINGAPORE DOLLAR Although Asian currencies were mostly steady to lower versus the US dollar, the Singapore dollar held firm after profit-seeking traders trimmed bearish bets on the city state's currency against the Malaysian ringgit. The Singapore dollar edged away from a four-year low of 1.3258 versus the US dollar set on Tuesday.
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