Most Asian currencies edged down against the dollar on Tuesday, undermined by a sell-off in equities, a rise in oil prices and wariness about central bank intervention to rein in local currency strength.
US equities fell sharply on Monday, hurt by doubts over holiday spending after a disappointing sales estimate from Wal-Mart Stores Inc A 1.36 percent fall in the broad S&P 500 index was the biggest since early June. Latin American markets, tracking Wall Street, also suffered heavy losses with the Brazilian real falling 1 percent.
This in turn hurt Asia's high-yielding currencies such as the Indonesian rupiah and Philippine peso and led to their under-performance within the region. "Obviously the overnight equity market losses have restrained Asian currencies and introduced two-way risk into the market," said Claudio Piron, a currency strategist at J.P. Morgan.
The rupiah shed almost 0.6 percent to 9,188 per dollar, its weakest in nearly two weeks, and the peso fell to 49.92 per dollar - down 0.6 percent from Monday's 4-1/2-year highs. "The tension in Latin American markets yesterday and the sharp fall in the Dow Jones is spilling over," said a Manila trader.
Asian shares were broadly lower, with the MSCI's broadest index of shares in the region excluding Japan, down about 1.6 percent. Oil prices, meanwhile, extended gains above $60 a barrel, weighing on local currencies. Some analysts pointed to a fall in the Chicago Board Options Exchange Volatility Index, or VIX, as a bearish signal for regional markets.
The VIX, often called Wall Street's fear gauge, on Monday jumped more than 13 percent to 12.23 in its biggest one-day percentage surge since mid-July when record oil prices were pushing stock prices around. "The VIX index has broken to new levels, so the external environment suggests Asian currency appreciation may encounter some bumps," said Bank of America currency strategist Christy Tan.
J.P. Morgan's Piron said US economic data and a speech by US Federal Reserve Chairman Ben Bernanke on the economic outlook later on Tuesday could provide markets with fresh direction.
Elsewhere, the South Korean won hovered around 930.70 per dollar, off the previous day's nine-year highs, while the Taiwan dollar was up a touch at about 32.65 to the US dollar - but down about 0.4 percent from three-month peaks, touched in early trade.
The Singapore dollar was quoted at about 1.5518 to the US dollar, little changed from levels traded late in Asia on Monday, and off a nine-year peak struck last week at 1.5467. "The market is calm but I think it is wary about intervention," said a Singapore dollar trader. "But the trend is bearish US dollar."