Most Asian currencies shed at least half a percent on Monday as investors fled to safe-haven assets, spurred by worries over a possible US recession. The Philippine peso, Indonesian rupiah and Malaysian ringgit fell by more than 0.6 percent against the dollar while the won and Indian rupee lost nearly 1 percent.
In Thailand, capital controls imposed in December 2006 were lifted, pushing the offshore baht weaker and leading it to converge with the onshore rate at around 31.60 per dollar. Fears of a recession in the United States after more news of write-downs at insurance companies and losses stemming from the subprime mortgage crisis encouraged players to dump risky assets in the United States and Asia, pushing the dollar down to a three-year low against the yen.
Investors headed instead towards gold, pushing its price up to a record high and closer to $1,000 an ounce. "Regional currencies seem to have run into a roadblock of continued equity weakness carried over from last Friday," said Emmanuel Ng, an analyst at OCBC Bank.
"Global growth worries and firm oil prices, not to mention spotty foreign equity interest" were pushing the currencies down, he said. Stocks in Asia excluding Japan weree down by more than 3 percent The Indian rupee fell 0.9 percent to hit a 5-1/2-month low at 40.3750 per dollar on fears that foreign funds would sell local equity investments and cause an outflow of funds.
China's yuan bucked the trend and rose by a marginal 0.1 percent to hit 7.1044 after China's central bank set a weaker-than-expected mid-point. The South Korean won fell by 0.9 percent to 947 per dollar as concern over the US credit crunch depressed the stock market. Another trade deficit also depressed the currency.
"With foreign investors selling stocks and net exports at a negative amount, it has caused heavy dollar-buying needs and traders who know this fact very well are also buying dollars to profit," said Nam Kyu Kim, a trader at ING Singapore.
South Korean trade data for February showed a monthly deficit for the third month in a row, caused by higher prices for oil and raw materials, and analysts at Goldman Sachs said the data supported their bearish outlook for the won.
"We are bearish about the Korean won, relative to the market consensus of 915-920. Our 6-month forecast, as of now, is 950, compared with the current rate, 945-946," said Goohoon Kwon, a senior economist at Goldman Sachs in Seoul.
However, a Reuters poll on Asian currencies indicated the market had reversed short positions on the currency since February and was slightly bullish. The country's central bank will review policy on Friday, following an Indonesian policy meeting on Thursday. While economists were divided on what to expect from the Korean meeting, most expected the benchmark Indonesian rate to stay at 8 percent.
Outside the region, investors were also watching for interest rate decisions this week from central banks in Australia, Britain, Japan, New Zealand, Canada and the euro zone.