Most emerging Asian currencies slid on Thursday as Federal Reserve officials fanned expectations of more US interest rate hikes later this year and China weakened the yuan. Malaysia's ringgit fell about 1 percent on slipping oil prices. The Thai baht hit a two-week low after the central bank on Wednesday cut its 2016 growth forecast for the third time and said the economy was losing steam.
The Singapore dollar eased with February factory output falling more than expected. Indonesia's rupiah slumped on growing dollar demand from local corporates for month-end payments and as most government bond prices slid. South Korea's won fell as traders unwound short positions in the US dollar. The dollar climbed to a one-week high against a basket of six major currencies after St. Louis Fed President James Bullard added his support to the possibility of more US interest rate hikes this year.
Bullard said in an interview on Wednesday that policymakers should consider raising rates at their next meeting in April. Philadelphia Fed President Patrick Harker said earlier this week he would prefer at least three hikes before the year end. Other Fed officials indicated their support for it might not be long before US borrowing costs rise. "They may fine tune market sentiment after the Fed reduced the number of rate hikes to two from four at the FOMC's March meeting," said Qi Gao, an emerging Asian currency strategist for Scotiabank in Hong Kong, referring to the Federal Open Market Committee.
"The USD is likely to strengthen against both major and EM Asian currencies across the board." Last week, the Fed's less hawkish projections for rate hikes dragged the dollar to a five-month low. Investors are awaiting US data later on Thursday, including durable goods orders and jobless claims. Upbeat readings could add to the case for the Fed to steadily tighten monetary policy.
The baht fell 0.5 percent to 35.30 per dollar, its weakest since March 10. Foreign and local investors reduced holdings in the baht with local bond market seeing outflows. The Thai currency came under further pressure as gold importers bought dollar to purchase the precious metal on dips. Spot gold was set to suffer the largest weekly loss since early November.
Gold is popular among Thai investors, and slides in the precious metal's price often prompt some investors to increase holdings in the physical metal or in gold futures. The won slid as much as 0.8 percent to 1,170.0 per dollar. The South Korean currency pared some of earlier losses as exporters bought it around the session low for month-end settlements. Some foreign hedge funds also purchased the unit on dips.