Political and security risks dominated currency markets on Monday, driving the Taiwan dollar down and the Philippine peso to fresh record lows.
Taiwanese markets worried about the instability following President Chen Shui-bian's narrow election victory after a puzzling assassination attempt, which sparked protests and a call for a recount of votes.
The yen was also irresolute, with markets unconvinced Japan had eased its intervention and unsure about the US dollar's trend.
Traders waited for news out of Pakistan, where troops have surrounded a group of Islamic militants and their tribal allies, possibly including a senior al Qaeda figure whose capture could boost the dollar. Israel's killing of the spiritual leader of the Hamas Islamic militant group heightened the security fears.
The Singapore dollar, Korean won, Indonesian rupiah and Thai baht were steady within slightly weaker ranges through the day.
The Philippine peso hit a fresh all-time low of 56.45 per dollar, while the Taiwan dollar fell 0.3 percent from Friday. Central banks in both countries were suspected of intervening to defend their respective currencies.
"Peso weakness seems to be driven by a combination of concerns over the upcoming election and also the recent balance of payments deficit numbers," said Peter Redward, currency strategist with Deutsche Bank.
"The recent sovereign issue should help provide stability," he said, referring to the $500 million bond the country sold this month. Still, trade data from the Philippines was disappointing, with the January trade deficit at $336 million, almost double that in January 2003.
In Taiwan, the government said on Sunday the central bank would intervene in markets if necessary to maintain exchange rate stability. Traders suspected it did on Monday.
Even though the authorities have pledged to limit volatility in the currency and stocks, analysts said the election outcome was a negative for the Taiwan dollar. A win by opposition candidate Lien Chan, whose KMT (Nationalist Party) holds a slim majority in parliament, would have helped Taiwan make progress with tough banking reforms and attracted foreign investment, said UBS strategist Bhanu Baweja.
Yet the KMT and the market would probably have to adjust to the reality of Chen's narrow win, and even if portfolio inflows into Taiwan ebbed the country's positive current account and foreign direct investment flows would prop the currency, Baweja said.
The Taiwan dollar was among the strongest in Asia earlier this year, rising 3.5 percent from December to mid-February. It has since been volatile.
"The pace of the downside in US dollar/Taiwan dollar may be relatively more moderate however, as politics is likely to remain combative and belligerent, rather than peaceful and reform oriented," Baweja said.