Most emerging Asian currencies skidded on Wednesday as disappointing Chinese factory activity boosted concerns over a slowing global growth and on a strong US dollar. Indonesia's rupiah hit a 17-year low on stock outflows, while the Malaysian ringgit slid to a near two-week trough - at levels last seen before the currency was pegged against the dollar in 1998, during the Asian financial crisis. The Singapore dollar touched its weakest in more than two weeks as lower-than-expected inflation data raised risks of further central bank easing.
Activity in China's factory sector unexpectedly contracted to a 6-1/2-year low in September, a private survey showed, raising worries about a sharper slowdown in the world's second-largest economy. The survey dragged both emerging Asian currencies and stocks lower. Regional currencies were already weaker, as the dollar hit a three-week high against a basket of six major currencies on revived expectations of a US interest rate increase this year.
"Asian currencies are likely to stay sluggish as fears on a slumping global economy are dominating financial markets," said Jeong My-young, Samsung Futures' research head in Seoul. "There would be no tonic for Asian currencies unless China, the centre of the slowdown fears, shows improvements or the Fed announces no rate hike within this year." The Federal Reserve last week kept interest rate unchanged due to a slowing global economy.
Still, some of top Fed officials indicated that the US central bank was still on track to raise interest rates this year for the first time since 2006. Adding to the gloomy outlook on Asia, sentiment among the region's biggest companies tumbled at a record pace in the third quarter on worries about China and the risks it poses to global growth, a Thomson Reuters/INSEAD survey showed.
The Indonesian rupiah lost 1.1 percent to 14,650 per dollar, its weakest since July 1998. Foreign banks sold the rupiah as offshore investors continued to unload Jakarta shares. Foreigners had sold a combined net 2.6 trillion rupiah ($177.5 million) worth of stocks in the previous six consecutive sessions. The rupiah came under further pressure from rising dollar demand from importers to meet month-end payments.
The official Jakarta Interbank Spot Dollar Rate, which the central bank introduced in 2013 to manage exchange rate fluctuations, was fixed at 14,623 rupiah per dollar, its weakest since the launch. Malaysia's ringgit, the worst performing Asian currency so far this year, slumped 1.2 percent to 4.3500 per dollar, its weakest since September 10, when the currency hit a pre-peg 17-1/2-year low.
The country's foreign exchange reserves rose in the first two weeks of September. The Singapore dollar slid as much as 0.6 percent to 1.4250 per US dollar, its weakest since September 8, when the city-state's currency touched a six-year trough. Singapore's headline consumer prices fell 0.8 percent in August from a year earlier, recording their biggest year-on-year drop since late 2009, data showed.