Most emerging Asian currencies slid on Monday as strong US jobs data slightly raised expectations of a Federal Reserve interest rate hike this year, while sustained appetite for higher yields in the region limited their losses. The South Korean won, however, turned higher after a Standard & Poor's sovereign rating upgrade. China's yuan fell as trade data showed both imports and exports for the world's second largest economy fell faster than economists had expected.
The Thai baht recovered some losses after hitting a near two-week low as local stocks touched a 16-month peak with Thais voting in a referendum to accept a new military-backed constitution. Earlier, the baht came under pressure from bond outflows. Malaysian's ringgit slid on low government bond prices. US employers added 255,000 jobs in July, higher than a forecast of 180,000 increase, after an upwardly revised 292,000 surge in June, data showed on Friday.
The data slightly increased odds of US rate hikes, but the Fed may stay cautious over tightening, given uncertainties arising from Brexit and a slowing China's economy, analysts said. Fed funds rate futures are pricing in less than a 20 percent chance that the US central bank will raise rates in its next policy meeting in September and less than a 50 percent chance even by the end of year.
"The payrolls were much stronger than expected and talks of US rate hike expectations were back on the table," said Christopher Wong, a senior FX strategist for Maybank in Singapore. "The talks remain preliminary at this stage. Given the environment of accommodative monetary conditions and potential Fed delay, EM carry trades could still be the theme to play," said Wong, adding the Indonesia's rupiah and the Indian rupee are seen major beneficiaries for a medium term.
The won started the day weaker as South Korea's foreign exchange authorities were on Friday suspected of intervening to keep the currency weaker than 1,110 per dollar, traders said. But it turned stronger after Standard & Poor's upgraded the South Korea's sovereign rating to AA from AA- with stable outlook. Exporters were already buying the won for settlements, while offshore funds bought the currency on dips. The baht earlier lost nearly 0.6 percent to 35.012 per dollar, its weakest since July 27, with most government bonds down.
Thailand's central governor told Reuters in an interview that there is no immediate need to cut interest rates to stimulate growth as liquidity remains ample. Foreign investors were net sellers of the local bonds in the previous three consecutive sessions, especially long-term notes, the Thai Bond Market Association data showed. Some of them may not want to add more Thai debt holdings as the central bank's stance could reduce chances of capital gains from bonds.
The Thai currency pared some of earlier losses as Bangkok shares jumped more than 1 percent with the referendum seen reducing political uncertainty in the country. The ringgit slid as most of Malaysia's government bond prices slumped. The Malaysian currency recovered some of earlier losses, tracking rises in oil prices, while sentiment towards on the ringgit remained weak. A senior Malaysian bank currency trader said he was looking to sell the ringgit around 4.0300 per dollar for a target of 4.0700. The currency stood at 4.0400 in the early afternoon.