The weakening yen pulled down the won on worry about reduced South Korean export competitiveness, and they dragged the Singapore dollar lower on a day most emerging Asian currencies barely changed before key US jobs data. The South Korean currency came under further pressure from geopolitical tensions with North Korea.
The Singapore dollar reacted more to lower yen and won than other regional units in the wake of weakening past key chart support levels this month. The yen hit a 3-1/2 year low against the dollar as the Bank of Japan's new leaders are expected to take bolder action to defeat deflation in its April policy meeting.
Haruhiko Kuroda, a vocal advocate of aggressive easing, is expected to have taken over as governor before the BoJ's next policy meeting, in April. But Ronald Ip, director of wealth solutions group for HSBC Global Markets, said the impact on emerging Asian currencies from a weaker yen could be limited for now.
"At the moment, that will not have major impact," Ip said. "But if dollar/yen could shoot up to 105 or 110 something like that and if they (Japan policymakers) are successful in reviving the economy, then Asian currencies will have to respond more aggressively," he added. The won eased on the weaker yen and North Korea's threat of a nuclear attack.
On Thursday, Pyongyang threatened a pre-emptive nuclear strike against the United States, raising the level of rhetoric as the United Nations imposed new sanctions against the reclusive country. But investors doubt how much further the won would fall from here as exporters were lined up to buy it on dips, especially when it was weaker than 1,090 per dollar.
Seoul financial markets long ago learned to shrug off the North's infamous threats. "We still have bids there. Unless there are actual events, not just words, I wonder how much the won would slide from current levels," said a senior foreign bank trader in Seoul. The Singapore dollar slid on selling by model funds as the euro gave up some of its overnight gains while the US dollar gained before the February payrolls figure.
This month, the Singapore dollar weakened past a 200-day moving average support and a 55-week moving average. But the city-state's currency recovered some of earlier losses on demand from local corporates. The ringgit edged up on exporters' demand for settlements and as some interbank speculators covered short positions before the weekend.
Still, investors preferred to sell the ringgit as a military confrontation between Malaysia and Filipino militants in Sabah prompted speculation that Prime Minister Najib Razak may delay a national election. "People prefer to buy dollar/ringgit on dips," said an Asian bank trader in Singapore, citing the ongoing conflict. "We expect the USD/MYR to come in around 3.09 in 1Q - once the dust on the Sabah conflict and elections are settled - before strengthening to 2.98 by year-end on the back of robust economic growth and a hike in the OPR," Maybank said in a note, referring to the overnight policy rate.