Most emerging Asian currencies eased on Tuesday, tracking weakness in stock markets, as traders booked profits ahead of regional holidays and key US job data later this week. The Chinese yuan touched a fresh 5-1/2-year low after the central bank fixed a weaker midpoint, reinforcing concerns that the central bank is letting the renminbi slide further to support struggling exports.
South Korea's won fell as offshore funds sold the currency, tracking weakness in regional peers, and on dollar demand linked to daily fixing. The Philippine peso slid as June inflation hit a 14-month high, causing investors to sell local bonds. Malaysia's ringgit dipped as investors booked profits ahead of holidays to mark the end of the Muslim fasting month.
"Markets lightened positions ahead of holidays and on some risk-off events," said Christopher Wong, a senior FX strategist for Maybank in Singapore, referring to risk aversion factors such as mounting bad loans in Italy. "I will be also cautious ahead of the US NFP later this week," Wong said. The June non-farm payrolls data will be released on Friday. A shockingly weak reading for May had fueled concerns about the health of the US economy and prompted investors to push back expectations for an interest rate hike that had been buoying the dollar.
Most emerging Asian currencies have been supported as investors sought higher yields in the region on expectations that global central banks, especially in developed countries, would ease policies further. The won slid as traders booked profits from the currency's recent gain with a chart resistance seen at 1,144.2, the 76.4 percent retracement of its depreciation from April to June.
The South Korean currency failed to strengthen past the level in the previous two sessions. Currency traders added dollar holdings, but South Korea's exporters sold it for settlements, limiting the won's downside. The peso fell as data showed Philippine annual inflation accelerated to 1.9 percent in June, the fastest pace in more than a year. The Philippine currency came under further pressure as traders unwound some of bullish bets with global risk sentiment cautious. But its downside was seen limited, given the recent stock inflows, traders said.
"The pair may have a bit more upside, but I reckon sellers may emerge above 47.00," said a senior Philippine bank trader in Manila, referring to dollar/Philippine peso. The ringgit edged down as traders squared optimistic positions ahead of holidays. Malaysian financial markets will be closed on Wednesday and Thursday. The Malaysian currency pared some of earlier losses as the government bond prices advanced with foreign demand. The 10- and 5-year bond yields fell to their lowest levels since 2013.
"It seems that levels around 3.9850 are now support," said a senior Malaysian bank trader in Kuala Lumpur, referring to the dollar's low against the ringgit on Tuesday. "Improved post-Brexit sentiment lifted the MYR and other Asian currencies higher, but we need new impetus," the trader said when asked if he expected further appreciation.
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