Most emerging Asian currencies fell on Monday hurt by a rebound in the dollar ahead of key US jobs data and as China's factory activity suffered their fastest drop in a year in April. More evidence of a slowdown in the world's second-largest economy will hit Asian exporters as China is a key market for commodities as well as parts, for re-exports.
South Korea's won skidded on disappointing economic data. The Indonesian rupiah and the Philippine peso slid to their weakest levels in more than a month. The HSBC/Markit Purchasing Managers' Index (PMI) for China fell to 48.9 in April, the lowest level since April 2014, as new orders shrank. The survey reinforced expectations for fresh policy stimulus from Beijing, which supported regional shares.
Still, currency traders and analysts focused more on the dollar's strength with caution mounting ahead of April US non-farm payrolls data due on Friday. US employers probably added 213,000 jobs last month, compared with 126,000 in March, a Reuters poll showed. Expectations of US interest rate hikes later this year stayed alive as two top US central bankers said on May 1 that the Federal Reserve could well raise interest rates as soon as June so long as economic data strengthens.
"Asian currencies will mildly weaken in May as the dollar is expected to strengthen on the back of continued positive US economic data in the second quarter," said Saktiandi Supaat, head of FX research for Maybank in Singapore. "Asian currencies have not priced in possibilities of the Fed's rate hike in September." Most regional currencies rose in April as dismal US economic data in the first quarter caused investors to reduce their views that the Fed may hurry to increase borrowing costs.
The won slid as the economic outlook raised concerns over possible intervention by the foreign exchange authorities to stem strength in the second-best performing Asian currency so far this year. South Korea's manufacturing activity and new export orders both contracted for a second month in April, a private sector survey showed earlier. Exports in April accelerated their decline for a fourth straight month to the worst in two years on lower oil prices and weak global demand. Despite such grim data, its finance minister said policymakers would probably wait until the end of June to assess whether more stimulus measures were needed, causing foreign investors to sell treasury bond futures.
Local financial markets will be closed on Tuesday for the Children's Day holiday. The rupiah lost 0.5 percent to 13,025 per dollar, its weakest since April 1. The Indonesian currency weakened in non-deliverable forwards , while long-term government bond prices slid. Spot rupiah pared some of its earlier losses as Jakarta shares jumped more than 1 percent and as the central bank was spotted intervening in the spot market to support the worst-performing Asian currency so far this year, traders said. The currency's weakness came as Indonesia's economic growth in the first quarter is seen having slowed to below 5 percent as domestic and export demand softened and global commodity prices tumbled, a Reuters poll showed.
The growth data will be released on Tuesday. Foreign investors were net sellers in the local stock market in the previous seven consecutive sessions, unloading a combined net 8.3 trillion rupiah ($638.2 million) during the period, Thomson Reuters data showed.
The peso fell as much as 0.4 percent to 44.71 per dollar, its weakest since March 31. The currency weakened in most non-deliverable forwards after government bond prices fell in the previous session. The 10-year yield on Thursday rose to 4.313 percent, its highest since January 8. Local financial markets were shut last Friday for Labour Day.
The peso pared some of its losses on expectations of inflows from overseas Filipino workers. The Philippine peso is likely to find support from increasing demand linked to remittances, especially as a new academic year starts from June, traders said. "Given the seasonality, I am more inclined to expect that the peso will continue to trade within the wide 44-45 range through May," said a senior Philippine bank trader in Manila.