The South Korean won led declines among emerging Asian currencies on Friday, with some regional units poised for their worst weekly losses in years as a prospective cut in Federal Reserve easy money spurred worries about capital outflows. The won hit a one-year low on continuous foreign stock selling while the Malaysia ringgit touched its weakest in nearly two years on falls in stocks and bonds.
The Philippine peso fell to its weakest in one and a half years before rebounding on apparent intervention and corporate demand, traders said. A sell-off in emerging Asian assets intensified after Federal Chairman Ben Bernanke signalled on Wednesday a possible end to the central bank's asset buying programme by the middle of 2014. That boosted worries that higher US interest rates could prompt a mass migration out of emerging markets. "Asian currencies will be held hostage to the broad dollar strength and caution toward emerging markets," said Emmanuel Ng, a foreign exchange strategist for OCBC Bank in Singapore.
Most emerging Asian currencies were set to suffer weekly losses. The ringgit has lost 2.8 percent against the dollar so far this week, which would be the largest weekly slide since May 2010, according to Thomson Reuters data. The Indian rupee has declined 2.8 percent. If the rupee maintains the loss, that would be its largest weekly depreciation since June 2012.
The peso has fallen 2.1 percent, which would be the biggest weekly loss since November 2010. The won declined 2.4 percent, its largest weekly loss since September 2011. Short positions in the Indonesian rupiah, the Philippine peso and the ringgit hit their largest levels in more than four years, a Reuters poll showed on Thursday. "Further position lightening up would occur in all three asset classes of emerging Asia, with the rout in emerging Asia debt markets taking the lead and accompanied by softness in Asian currency units," said CIMB Investment Bank in a client note, referring to regional debt, equities and currencies. The won fell as much as 1.2 percent to 1,159.4 per dollar, the weakest since June 26, 2012, as foreign investors extended a selling spree in the Seoul stock market. Offshore funds also reduced won holdings.
Foreigners sold a net 776.4 billion Korean won ($677.7 million) worth of stocks in the main exchange, selling stocks for the 11th consecutive session. During the period, they dumped a combined net 5.2 trillion won, according to the Korea Exchange data. But the South Korean currency recovered some earlier losses with the authorities spotted buying the won to limit its downside, traders said. Local exporters also bought the won for month-end settlements.
"The won is on a falling trend. But intervention holds the key on how much and how quickly the won would decline," said a senior foreign bank trader in Seoul. The ringgit fell 0.4 percent to 3.2130 per dollar, the weakest since October 4, 2011, as offshore funds kept buying the dollar. The trader said the ringgit may weaken to 3.2600 per dollar.
The peso turned higher as central bank intervention and corporate demand caused investors to cover short positions, traders said. Earlier, the Philippine currency lost up to 0.8 percent to 44.17 against the greenback, the weakest since January 9, 2012 on weaker Philippine stocks and bonds. "The market was caught long dollars without any fresh reasons to add onto positions," said a senior Philippine bank trader in Manila. "Onshore corporate accounts were happy to sell dollars at these levels."