The South Korean won led Asian currencies lower on Wednesday as worries over the global economy dented confidence gained this week after governments took steps to help banks through the financial crisis. The South Korean won lost as much as 3.9 percent after the finance minister painted a gloomy picture for the economy, saying it would struggle to grow 4 percent this year in the face of the global financial turmoil.
It later cut some losses as some traders cited dollar-selling intervention by the authorities. The Singapore dollar fell to 1.4727 per US dollar, down one percent from a one-week high hit on Tuesday, as investors unloaded US dollars on renewed risk aversion. "Shorts are buying back US dollars," said a trader in Singapore.
On Friday Singapore's central bank shifted to a zero appreciation bias for the currency in a policy easing after the economy slipped into a recession. Meanwhile, the Philippine peso lost 0.6 percent to 47.51 per dollar. Annual growth in remittances from overseas Filipino workers slowed to 10.4 percent in August, a five-month low, data showed on Wednesday, a day after the central bank said such inflows may ease due to the global financial crisis.
"We expect flows to be less peso supportive going forward as we expect remittances growth to slow in the coming quarters on a slowing global economy," Goldman Sachs analysts Mark Tan Michael Buchanan in a note. Asian currencies gained on Monday and Tuesday as regional stocks rallied following steps taken by policymakers in the United States and Europe to bail out their ailing lenders.
The Chinese yuan, which has been kept on a tight leash by the central bank since mid-July, was little changed at 6.84 per dollar. China's foreign exchange reserves grew by $21.45 billion to $1.91 trillion in September, Tuesday's data showed, highlighting that while most Asian central banks are selling dollars to support their weakening currencies, China's central bank is still buying dollars to stabilise the yuan.
Ben Simpfendorfer, an economist at Royal Bank of Scotland, said he expected the central bank to keep the yuan stable until the end of 2008. The central bank may continue to buy dollars to limit the yuan's rise but it should avoid currency weakness that raises doubts about China's economic stability, he said in a note to clients.
"We accordingly believe that stability is the new guiding principle of FX policy," he added. Nonetheless, the yuan is up 6.9 percent against the dollar so far this year, outperforming other emerging Asian currencies that have been hit harder by capital outflows amid the global financial turmoil. The won has fallen 24 percent against the dollar this year, while the Indian rupee has lost 19 percent.