Most emerging Asian currencies rose on Friday after disappointing US job data but their outlook stayed bearish on expectations of interest rate hikes by the Federal Reserve later this year and concern about Greece's debt crisis. However, Malaysia's ringgit hit a 10-year low after the Wall Street Journal reported Prime Minister Najib Razak had close to $700 million in deposits from troubled state fund 1MDB wired into his personal account. The fund denied the report, said it never provided money to Najib.
The South Korean won rose on exporters' demand for settlements. Most of its regional peers edged up as investors cut bearish bets due to the US dollar's broad weakness.
US employers hired 223,000 workers last month, the government data showed on Thursday, fewer than the 230,000 increase forecast by economists polled by Reuters. The government also downgraded its reading on April and May job growth. Still, investors doubted if emerging Asian currencies could return to an appreciation path as the job figure was not weak enough to change expectations the Fed will increase rates this year. "It's glass half full or half empty. It may hit the sweet spot with a hike still on the cards this year but a more gradual tightening path," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.
"So, initial USD strength is still intact which will hit Asia FX and EM FX harder given the poor cyclical picture and outflow fears." Activity in China's service sector slowed to its lowest in five months in June, a private survey showed, indicating the world's second-largest economy needs more policy support. Risk aversion also increased ahead of Greece's Sunday referendum on an international bailout deal that could ultimately determine whether it stays or not in the euro zone.
Chinese stocks continued to tumble, causing the securities regulator to investigate market manipulation. The ringgit started Friday's session firmer but turned weaker to hit 3.7860 per dollar, its weakest since July 2005. Friday's depreciation again made the ringgit emerging Asia's worst performing currency this year. Earlier in the week, the decision by Fitch Ratings to affirm Malaysia's credit rating and change the outlook to "positive"
from "stable" made the ringgit strengthen enough to leave the rupiah as the weakest. Analysts said the WSJ article on 1MDB undercut some of the positive sentiment generated by the Fitch move. "It doesn't help market confidence," one analyst said. The ringgit has lost 0.5 percent against the dollar so far this week, leading weekly losses among emerging Asian currencies, Thomson Reuters data showed.
The won followed the ringgit with a 0.3 percent loss this week as South Korea's exports in June fell for a sixth straight month, while the current account surplus hit an eight-month low in May. By contrast, India's rupee has gained 0.4 percent throughout this week as the central bank chief said on Thursday it is committed to steadily increasing how much government debt foreign investors can buy.
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