Indonesia's rupiah hit a fresh 17-year low on Wednesday, leading losses among emerging Asian currencies due to waning risk sentiment, while the Singapore dollar rose as the central bank was suspected of intervening. The rupiah fell to a new low, last seen during the 1997-98 Asian financial crisis, on dollar demand from local companies and as foreign investors sold the currency amid lower stocks and bond prices.
The South Korean won slid to its weakest in 20 months a day before the central bank's interest rate meeting. Malaysia's ringgit touched a six-year low. Asia-Pacific shares outside Japan fell to a two-month low and the dollar hit a 12-year peak against the euro on views that the US Federal Reserve may raise interest rates by mid-year, earlier than expected.
That hurt riskier assets both in the United States and elsewhere with the S&P 500 suffering its worst decline in two months overnight and emerging market stocks down to their lowest since early January. China's industrial output, retail sales and fixed-asset investment in the first two months of the year missed market expectations, underscoring concerns over a slowdown in the world's second-largest economy.
"Double whammy of USD strength and risk off tone lifted USD/Asia," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Sydney. Still, Ji saw some chances of a rebound in emerging Asian currencies, saying the US dollar remains in technically overbought territory.
He said the Singapore dollar's downside was limited on suspected intervention by the central bank and the won may head to the 1,100 per dollar level again once the Bank of Korea stands pat on Thursday. The Singapore dollar gained as the Monetary Authority of Singapore looked to support the third worst-performing Asian currency this year. On Tuesday, the city-state's currency hit 1.3910 per dollar, its weakest since July 2010. The Singapore dollar has lost 4.4 percent so far this year.
Traders scrambled for the Singapore dollar to cover short positions as it strengthened past 1.3880. "Given the MAS' clear determination, the dollar/Sing is unlikely to rise as much as others," said a foreign bank trader in Singapore, referring to the US dollar/Singapore dollar. Still, many investors sold the city-state's currency on rallies due to growing expectations that the central bank may ease policy in April meeting. The rupiah fell 1.2 percent to 13,240 per dollar, its weakest since August 1998. Indonesian government bond prices slid with the 10-year yield at 7.568 percent, its highest since January 20.
The official Jakarta Interbank Spot Dollar Rate, which the central bank introduced in 2013 to manage exchange rate fluctuations, was fixed at 13,164 rupiah per dollar, the weakest since the launch. The central bank was spotted intervening to support the worst-performing Asian currency so far this year, although the authorities were not targeting to keep a certain level, traders said.
On Tuesday, deputy central bank governor Perry Warjiyo said the authority will always ensure the currency was stable according to market fundamentals. The won lost as much as 0.6 percent to 1,129.6 per dollar, its weakest since July 2013 as offshore funds continued to sell the currency.
The Bank of Korea is likely to keep interest rates unchanged this week but cut them next month when it revises its forecasts to reflect a more tepid economic recovery than initially expected, a Reuters poll showed. Thailand's baht hit a near two-month low on Wednesday after the central bank unexpectedly cut interest rates at its policy meeting. The baht fell as much as 0.3 percent to 32.81 per dollar as of 0727 GMT, its weakest since mid-January. The Bank of Thailand joined regional easing moves by slashing its policy interest rate by 25 basis points to 1.75 percent in a surprise move.
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