Most Asian currencies struggled on Monday after uninspiring US jobs data issued late last week failed to dim the prospects of another US Federal Reserve rate hike in December. Friday's employment report showed a slowdown in US wage growth and a smaller-than-expected increase in nonfarm payrolls in October, but analysts held to their expectations of a Fed rate hike at the end of the year.
The dollar climbed to its highest level in nearly eight months against the yen after the Bank of Japan said it will continue with powerful monetary easing under its yield curve control policy. Investors are bullish on the US dollar, said Stephen Innes, head of trading in Asia-Pacific for Oanda in Singapore, noting: "There is profit-taking in Asian currencies across the board now."
The declines in Asian currencies were also due to weakness in region's equity markets. MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.7 percent, led by losses in South Korea, Singapore and Taiwan shares. "The risk sentiment is wobbling a little bit," said Oanda's Innes.
The South Korean won dropped more than half a percent against the dollar on the day. South Korea's finance minister said on Friday that the government was closely watching currency movements because the won's recent gains against the dollar seemed excessively fast. The won has gained about 2.5 percent over the last month.
The Indian rupee and Indonesia's rupiah fell about quarter of a percent each as a rise in crude oil prices weighed on the two currencies. India and Indonesia are net importers of crude oil, so higher oil prices are likely to increase their import costs and affect their currencies.
Indonesia's slower-than-expected GDP growth in the third quarter also subdued the rupiah. Investors are scrutinising US President Donald Trump's Asian tour this week, worried that tough talk against North Korea and on trade relations could affect regional currencies, analysts said. "I look at Asian currencies as two sections: exporters and the high yielders," said Oanda's Innes.
High yielding currencies are being pressured by strong upward momentum in US bonds, while the currencies of major exporters are wobbling because of risks related to bilateral relationships with the United States, he said. The central banks of Malaysia, Thailand and the Philippines are due to hold monetary policy meetings this week and most analysts expect them to stand pat.
The Philippine peso was down 0.15 percent against the dollar, tracking the overall decline in regional currencies. However, traders said the weekend's OFW (overseas Filipino workers') remittances inflows supported the peso on the day. Foreign investors have bought a net $25 million in Philippine equities this month, against net selling in most of the region's equity markets. With a fall of more than 3 percent against the dollar, the peso is the region's weakest performer this year.
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