Asian currencies broadly fell against the dollar on Monday, as a series of upbeat comments by US Federal Reserve policymakers and rising US bond yields triggered further short-covering in the greenback. Asian currencies had held firm in the first half of August as global investors were drawn to relatively high yields in the region. They have retreated over the past few days, however, as market participants pared back their bearish bets against the dollar.
The Indonesian rupiah fell to 13,230 against the dollar on Monday, its lowest level since late June, according to Thomson Reuters data. The Singapore dollar and the South Korean won both hit their lowest levels against the US dollar since late July. The Chinese yuan weakened as the dollar strengthened globally, while an official index showed that the yuan hit a record low against a basket of trade-weighted currencies last week.
Recent comments from Fed officials that took an upbeat tone on the US economy and rising US bond yields have triggered the recent bout of dollar-buying, traders and analysts said. "It looks like there's some general unwinding of short-dollar positions ahead of the Jackson Hole conference," said a trader for a Japanese bank in Tokyo. "I don't think people are taking new long positions in the dollar."
The Fed's annual conference in Jackson Hole, Wyoming is a near-term focus for investors, with Fed Chair Janet Yellen due to deliver a speech there on Friday. The dollar took cues from comments by Fed Vice Chairman Stanley Fischer, who on Sunday gave a generally upbeat assessment of the US economy's current strength, saying that the central bank is close to hitting its job and inflation targets. A rise in US bond yields helped support the dollar against emerging Asian currencies. The US 10-year Treasury yield set a two-week high of 1.60 percent on Monday.
Still, it seems too early to say that the firm underlying trend for emerging Asian currencies has changed, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo. "The levels of US bond yields are still very low, and I think there is a lot of demand for higher yields," he said. Indian bonds and the rupee fell as investors took the appointment of Urjit Patel as the next governor of the Reserve Bank of India as a signal of policy continuity at the central bank, making a near-term cut in interest rates unlikely. The rupee slipped 0.2 percent versus the dollar and touched a near one-month low at one point, on a day when emerging Asian currencies were generally weaker.