The South Korean won slid for a fourth consecutive week as investment banks and hedge funds on Friday cut exposure in emerging Asian currencies on mounting concerns of a slowing global economy and European debt crisis. The won and its peers are expected to fall more after recent data heightened concerns that the United States will head back into recession at the same time the country's rising debt load and record deficit leave the Federal Reserve with fewer options to stimulate growth.
Worries about the eurozone's debt problems are also growing with the crisis seen taking a heavy toll on European banking sectors. The issues, which have dampened riskier assets in the globe including stocks while lifting safe-haven assets such as gold, may continue to put pressure on emerging Asian currencies.
"The US data was terrible and the European funding situation seems to be getting worse so I am turning less upbeat on Asian currencies," said Westpac currency strategist Jonathan Cavenagh in Singapore. "I would tell my clients to maintain tight stops in short USD/Asia positions." Most emerging Asian currencies have slashed gains this month on persistent worries about a global economic slowdown and European debt crisis. The Indian rupee and the won lost more than 3 percent each against the dollar, according to Reuters calculations. If these losses hold till the end of August, they are heading for their worst month since May 2010.
The Singapore dollar, the safe-haven in Asia, was no exception, although its fall was smaller than its peers. The city-state currency has eased 0.75 percent against the greenback. Investment banks took profit from the best performing emerging Asian currencies so far this year on negative interest rates and the central bank's determinations to prevent levels stronger than 1.20 versus the US dollar. The won extended falls along with Seoul shares, to record a fourth consecutive losing record a consecutive losing week.
The South Korean currency fell 0.82 percent on the week, extending its losing streak to a fourth week, the longest such spell since mid-June 2010. The Singapore dollar rose on Friday as local interbank traders bought the city-state currency on dips after it approached a technical support level. Earlier, it weakened to soft as 1.2178 versus the US dollar, near its initial support at 1.2210-1.2220, around a 55-day moving average. Its next support is seen at 1.2250-1.2260.