The Philippine peso fell and other Asian currencies gave up their early gains on Thursday after a string of news reports from Europe stoked fresh concerns about the fallout from the US subprime mortgage market.
French bank BNP Paribas said that problems in the US subprime mortgage sector meant it had decided to suspend temporarily the calculation of the net asset value of three of its funds. Subsequently, the German central bank said it has convened a meeting to discuss a rescue package put together by the German banking sector for lender IKB, which has also been hit by the subprime woes.
"We are clearly going to see funds exit risky positions after the BNP news," said Gerrard Katz, head of North Asian FX trading at Standard Chartered Bank. "It's a big risk aversion move," he said, adding that a spike up in US overnight deposit rates had added to the jitters.
The Japanese yen jumped back to the stronger side of 119 per dollar from the day's lows around 119.78, an indication investors were getting out of risky trades funded by cheap yen. The peso seesawed from being 0.4 percent stronger at 45.02 per dollar in the morning to being weaker by the same extent at 45.36. The Indonesian rupiah, which had rallied a quarter of a percent to near 9,270 per dollar fell back to 9,310.
A National Day holiday in Singapore thinned trading volumes in Asia, but still the currencies were volatile. The Asian high-yielders, including the Korean won had risen earlier in the day as investors sold the yen to fund carry trades in which they buy higher-yielding assets. This week's statements from the US Federal Reserve, that it remains worried about inflation and expects moderate growth, had helped temper some fears about the credit markets.