Asian currencies weakened on Friday on further unwinding of positions by traders fearing more central bank intervention and on the dollar's strength despite the softness in US inflation data. The Thai baht was the biggest loser, shedding nearly 0.4 percent as it hit a one-week trough of 36.60 per dollar.
The Philippine peso was the lone exception to the weakness, as a heavy bunch of export earnings forced it to rally 0.2 percent to around 49.96 per dollar. "When spot failed to go above 50.20 yesterday, a lot of exporters placed orders to sell," said one Manila-based trader, referring to the peso's rally.
Sean Callow, Westpac Bank's currency strategist, said the peso has traditionally been driven more by flows from trade transactions. "So it is less likely to participate in any knee-jerk moves that, for example, the Sing dollar and Korean won have when broad dollar sentiment changes," he said.
But this week's decline in the Asian currencies has raised worries about whether this is merely a result of intervention or the start of a bigger sell-off of emerging markets.
The Singapore dollar lost a quarter of a percent to hit a low of 1.5633 per US dollar, taking losses from 9-year highs struck this week to half a percent and prompting speculation the Monetary Authority of Singapore may have intervened, as several other central banks did this week.
The Bank of Thailand was suspected of intervening to rein in the baht after it hit its strongest level in nearly seven years on Tuesday. The Reserve Bank of India and the Bank of Korea were also spotted buying dollars to halt the appreciation in their respective currencies, the rupee and the won.
The won was slightly weaker at 938 per dollar on the day, but strong dollar earnings for Korean shipmakers and electronics exporters had helped lift it from lows near 944 on Thursday.
The Taiwan dollar fell a quarter of a percent on Friday. Analysts at UBS said selling of Asian currencies was spurred not just by intervention fears but by warnings from central banks in New Zealand and Japan on the heavy accumulation of carry trades.
The yen and Taiwan dollar have been the favoured funding vehicles in Asia for carry trades, which involve borrowing low-yielding currencies to invest in high-yielding assets. "The combination of these has contributed to position squaring particularly in high-yielding Asian currencies," UBS said.
"The high-yielding currencies - Indonesian rupiah, Philippine peso, Korean won, Indian rupee - weakened significantly while the lower-yielding currencies such as the Singapore dollar and Taiwan dollar have largely remained resilient."