Emerging Asian currencies fell on Wednesday as investors cut exposure to risky assets across the region following lower growth forecasts for China and other emerging markets by the International Monetary Fund. Uncertainty over reforms in Greece and Spain's debt problems further eroded the optimism generated by stimulus measures launched by major central banks last month.
The South Korean won eased on dollar demand from importers and the Malaysian ringgit fell as local traders added safe-haven dollar positions. The Philippine peso slid as weak exports data cast doubt on the government's 2012 export growth target and bolstered pressure on policy easing.
"There is little momentum to lift risky assets including Asian currencies now, although those units may find some support if China takes additional stimulus," said Jeong My-young, Samsung Futures research head in Seoul. Last month, emerging Asian currencies were boosted by Europe's measures to ease the three-year old debt crisis in the continent.
Such moves are likely to keep supporting regional currencies, but their gains would be checked by weak trade balances, the broad strength of the US dollar and China's reluctance to let the yuan appreciation, a Reuters poll showed. The won slid on dollar demand from domestic importers, but exporters bought the South Korean currency for settlements, limiting its downside.
Some offshore funds joined bids for the local currency on dips, dealers said. Still, most investors did not follow those offshore funds before the central bank's meeting on Thursday when the Bank of Korea is expected to cut interest rates. The ringgit slid as local interbank speculators added dollar holdings on a weaker euro.
The Malaysian currency tried to clear a chart support at 3.0790 per dollar, the kijun line on the daily Ichimoku chart. The local unit has been closing firmer than the kijun line since late July. The ringgit may head to 3.0880, its weakest level on September 26, if the kijun line is breached.
But a Malaysian bank dealer in Kuala Lumpur said the ringgit may not reach the level unless the euro falls to $1.2800, adding there is risk of the euro's rebound. The Philippine peso fell after data showing the country's exports in August suffering the steepest drop in eight months and as traders squared bullish bets in the local unit. The country is unlikely to hit its export growth target of 10 percent this year with growth seen only reaching up to 7 percent, the trade secretary said.
The peso recovered some of initial losses, helped by remittances inflows, but traders expect sustained worries about Europe to put more pressure on the currency. A foreign bank dealer in Manila said the Philippine currency is seen having room to weaken to 41.60 per dollar due to importers' dollar demand. The peso may head to 41.75 this week once the local currency weakens past 41.60, he added. "The market still saw remittances, but clients' dollar demand is outpacing supply for now," said the dealer, referring to Philippine importers.