Most emerging Asian currencies lost ground on Wednesday as a rout in China's equity markets and Greece's festering debt crisis hurt investors' appetite for riskier assets. Traders said Malaysia's central bank was spotted intervening in forex markets for the fourth straight session to stem pressure on the ringgit as political tensions mounted over Prime Minister Najib Razak and debt-laden state fund 1MDB.
The ringgit was little changed by midday, while Malaysian stocks and bonds fell. The South Korean won hit a two-year low against the dollar as foreign investors kept selling Seoul shares . Against the yen, the won slid to its weakest in more than three months as the Japanese currency rose on safe-haven seekers. Thailand's baht fell to as low as 34.051 per dollar, its weakest since September 2009. Chinese stocks tumbled again despite a fresh round of government rescue measures. One regulatory official said investors were in the grip of "panic", boosting fears of a possible financial crisis in the world's second-largest economy.
"China's continuous efforts have not eased the panic sentiment. That increased worries about the economy," said Jeong My-young, Samsung Futures' research head in Seoul. "Investors had hoped China's economic stimulus in the first half could take effect from the third quarter. But the hope waned as a series of steps failed to lift stocks." China is a major export market for many emerging Asian countries and regional currencies have been under pressure from the sluggish Chinese economy.
The ringgit barely moved as the central bank was seen keeping the currency firmer than 3.8100 per dollar. On Tuesday, it weakened past the old currency peg of 3.80 per dollar, fixed in September 1998 during the Asian financial crisis and scrapped in 2005. Still, the Malaysian currency is expected to remain weak as stocks and government bond prices slid. Prime Minister Najib has instructed his lawyers to consider action against the Wall Street Journal (WSJ), which reported that investigators probing 1MDB had traced nearly $700 million to bank accounts in his name.
Najib has denied taking any money from 1MDB or any other entity for personal gain. Kuala Lumpur shares fell 0.8 percent. The 10-year, 5-year and 3-year government bond yields rose. The won lost as much as 0.8 percent to 1,139.2 per dollar, its weakest since July 10 2013, as offshore funds sold the currency. Seoul shares fell 0.9 percent as foreign investors were set to become net sellers in the main exchange for a fourth consecutive session. They unloaded 319.2 billion won ($281.1 million) worth of stocks after dumping a combined net 400.0 billion won in the previous three sessions, according to the Korea Exchange.
The South Korean currency recovered some earlier losses ahead of a psychological support at 1,140, analysts said. It has a chart support line at 1,142.7, the 50 percent Fibonacci retracement level of its appreciation from 2010 to 2014, they added. Caution also grew over possible intervention by the foreign exchange authorities to stem volatility in the won, traders said. That came as the won slid to the yen as much as 0.9 percent to 9.3338, its weakest since March 26. The won's strength against the yen has been a headache for South Korea's policy makers as local exporters compete against Japanese rivals in overseas markets.