The Malaysian ringgit and Philippine peso led Asian currencies lower on Wednesday as investors fretted that China's move to tighten monetary policy could choke the region's economic recovery. China's central bank surprised the market by raising the proportion of deposits banks must put as reserve on Tuesday to rein in credit growth and head off economic overheating, hammering stocks and commodities.
The move also hit commodity currencies such as the Australian dollar while lifting the Japanese yen.
RINGGIT The ringgit shed half of a percent to 3.358 per dollar - in line with local stocks - as investors took profits from recent gains after China's tightening raises concerns about the pace of Asia's recovery. But ringgit was well supported near 3.360 as local exporters are seen selling dollars.
One-month dollar/ringgit NDFs rose from Tuesday close of 3.3425 to 3.3475, virtually at par with spot. Meanwhile, investors moved to buy back the Australian dollar against the ringgit following the former's sharp drop overnight on Beijing's move. Aussie/ringgit rose to 3.0904 from 3.0738 on late Tuesday.
PESO The peso lost 0.4 percent to 45.84 per dollar. "Dollar/peso reacted higher to the China reserve hike on fear that shutting off liquidity might weaken Chinese growth and the region's as well," said a Manila-based dealer.
"But dollar/peso ran into offers above 45.80 - seems there is a good sized dollar inflows into the system as a good foreign name is selling heavily," the trader added. Meanwhile, offshore forwards markets were quiet, tracking the onshore. One-month dollar/peso NDFs rose from Tuesday close of 45.77 to 45.86, virtually at par with spot.