Most emerging Asian currencies slid on Thursday, as the US Federal Reserve rekindled expectations of an interest rate hike in December while most regional central banks will maintain an easier monetary policy bias. South Korea's won hit its weakest in more than two weeks as offshore funds sold the currency. Indonesia's rupiah fell as Jakarta stocks lost ground.
The Philippine peso eased to 46.93 per dollar, its weakest since September 29, on weaker equities. The Malaysian ringgit slid on lower bond prices. The Fed downplayed global economic headwinds on Wednesday and left the door open to tightening monetary policy at its next meeting in December. That lifted the US dollar to near 2-1/2-month highs against a basket of major currencies. "With the overnight FOMC statement putting a hike in December back on the table we should see a retracement of the Asian currency rally," said Khoon Goh, senior FX strategist for ANZ in Singapore, referring to the Federal Open Market Committee.
Investors had cut bets on the Fed's rate hike this year due to some disappointing data on the world's top economy, which had helped emerging Asian currencies rise earlier this month. "Policy divergence is not just from the US side looking to lift rates, but also from other central banks easing further as well," Goh said. Indonesia's central bank will assess whether there is room for an interest rate adjustment at a meeting on November 17, while looking at domestic and international economic conditions, a Bank Indonesia official said.
Indonesia has rolled out a series of economic measures to support flagging growth but the central bank has refrained from cutting interest rates due to inflationary pressures and risk of capital outflows. Regional monetary authorities have eased policies to shore up economic growth. China's central bank last week cut interest rates for the sixth time in less than a year and lowered the amount of cash that banks must hold as reserves. The Monetary Authority of Singapore earlier this month also eased policy for the second time this year by reducing the rate of the Singapore dollar's appreciation.
WON The won started local trade down 1.2 percent at 1,145.0 per dollar, its weakest since October 14. The South Korean currency pared some of its losses as exporters bought it on dips for month-end settlements. Still, offshore funds sold the won on rallies as Seoul shares turned lower.
The rupiah fell as Indonesia's stocks lost 2 percent, underperforming regional equity markets. The Indonesian currency came under further pressure from increasing dollar demand from importers for month-end payments. Spot rupiah's downside was limited as its non-deliverable forwards strengthened with some government bond prices up. The ringgit slid as most government bond prices and local stocks fell. The Malaysian currency pared some losses as oil exporters and traders bought it around session lows at 4.300 per dollar.