Most emerging Asian currencies slipped on Wednesday as US Treasury yields advanced on some Federal Reserve presidents' vocal support for interest rate hikes, while caution prevailed ahead of euro zone meetings on Greece's debt standoff. The South Korean won underperformed on the yen's weakness and increasing caution over possible intervention by the foreign exchange authorities to stem the won's strength against the Japanese currency.
Malaysia's ringgit fell on lower bond prices and overnight slides in oil prices. The dollar held firm against a basket of six major currencies, staying around a one-month high versus the yen. The benchmark US 10-year Treasury yield rose above 2 percent for the first time in a month on expectations that the Fed might increase interest rates by mid-2015. Richmond Fed President Jeffrey Lacker, an inflation hawk, said on Tuesday that a June hike was an "attractive option" and San Francisco Fed President John Williams said economic conditions are "getting closer" to the point where it made sense to think about starting to normalise policy.
"A renewed focus on the Fed's eventual 'liftoff'... set against the polarisation of policies with the rest of the other global central banks may continue to underpin the dollar," said Emmanuel Ng, a foreign exchange strategist with OCBC Bank, in a client note. Emerging Asian currencies are likely to stay under pressure on the dollar's strength, noted Ng. Investors were awaiting the euro zone finance ministers' meeting on Greece debt issues later on Wednesday and an EU leaders' gathering on Thursday. Officials, however, are downplaying the chance of a breakthrough.
The won fell as authorities were suspected of intervening to stem the currency's appreciation on Tuesday when it outperformed regional peers with expectations of further interest rate cuts fading, traders said. The South Korean currency pared some of its earlier losses as exporters took to buying on the dips for settlements. Traders also hesitated sell the won as expectations of more monetary stimulus eased after Finance Minister Choi Kyung-hwan said on Monday interest rate policy will likely stay put.
The ringgit slid as government bond prices fell and the currency's non-deliverable forwards weakened. The Malaysian currency came under further pressure from selling against the neighbouring Singapore dollar. The rupiah eased on local corporates' dollar demand.
The official Jakarta Interbank Spot Dollar Rate, which the central bank introduced in 2013 to manage exchange rate fluctuations, was fixed at 12,700 rupiah per dollar, weaker than the previous session's 12,644. The Indonesian currency recovered some of earlier slides on demand from real money funds. Jakarta shares also rose 0.3 percent. Foreign investors were net buyers in the last eight consecutive sessions, absorbing a combined net 3.7 trillion rupiah ($291 million) during the period, according to Thomson Reuters data.
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