Most emerging Asian currencies slid on Monday and were set to post steep monthly losses as top US Federal Reserve officials left the door open for an interest rate hike in September and Chinese stocks tumbled again. South Korea's won fell as foreign investors continued to sell local stocks. Foreign investors sold the Indonesian rupiah, while the Singapore dollar skidded with hedge funds selling.
Fed Vice Chairman Stanley Fischer, speaking at the central bank' conference in Wyoming, said recent volatility in global markets quickly could ease and possibly pave the way for a rate hike. Chinese stocks tumbled ahead of official factory activity data on Tuesday which is likely to deepen fears of a sharp slowdown in the world's second-largest economy. Activity in China's manufacturing sector in August likely shrank at its fastest pace in three years, a Reuters poll showed.
"Jitters over emerging Asian currencies may persist unless we see a recovery in Chinese data, given doubts over China's ability to support the economy," said Jeong My-young, Samsung Futures' research head in Seoul. Investors are also awaiting key US economic data later this week including August nonfarm payrolls for clues on the timing of US tightening. Emerging Asian currencies, however, are unlikely to find much support, some analysts said. "A strong payrolls report might be required for the Fed to pull the trigger in September but even if tightening is delayed a few months it will not be positive for EM FX," analysts for Societe Generale said in a note.
"As long as we in the waiting game and uncertainty is prolonged, EM FX will be unable to rally on a sustained basis." Emerging Asian currencies were on the course for sharp monthly losses in August as China's near 2 percent devaluation of the yuan on August 11 sparked fears of a global currency war and a rout in global financial markets hurt risk sentiment. The renminbi has lost 2.6 percent against the dollar so far August, which would be a record monthly slide, according to Thomson Reuters data. Despite repeated assurances from top Chinese officials that there is no basis for continued depreciation of the yuan, most market watchers believe there is political pressure for it to weaken further to support exports and reflecting expectations of further policy easing.
Elsewhere in North Asia, the won has slid 1.1 percent so far August, which would be a fourth consecutive month of losses, the longest monthly falling streak since November 2008. Taiwan's dollar has depreciated 2.5 percent, which would be the largest monthly loss since September 2011, as foreigners sold stocks. Malaysia's ringgit was the worst regional performer of the month, losing 9 percent of its value, the largest monthly slide since December 1997. Confidence in the ringgit has melted amid a prolonged corruption scandal linked to Prime Minister Najib Razak and indebted state fund 1Malaysia Development Berhad. Former Malaysian leader Mahathir Mohamad called for a "people's power" movement to topple Najib over the scandal, joining anti-government protesters during the weekend. The Thai baht has lost 2.0 percent in August, which would be its sixth straight month of depreciation, on capital outflows. That would be the longest monthly losing streak since January 1997, according to Thomson Reuters data.
Thailand's central bank last week eased curbs on overseas investments, expressing its preference for a weaker baht to boost the economy. The Singapore dollar has lost 2.9 percent, its biggest monthly loss in nearly three years, as the sluggish economy increased risks of further monetary easing in October. The rupiah has slid 3.6 percent as a fresh fall in commodity prices inflict further pain on Southeast Asia's largest economy. India's rupee has fallen 3.3 percent, while the Philippine peso was down 2.1 percent.