Most emerging Asian currencies eased on Monday as the dollar rallied after the Federal Bureau of Investigation said it stood by its earlier recommendation that no criminal charges were warranted against Democratic presidential candidate Hillary Clinton, giving some relief ahead of Tuesday's US election. Investors favour Clinton, seeing her as the status quo candidate, whereas by her Republican rival Donald Trump has unnerved markets with his stance on trade, foreign policy and immigration issues.
The FBI news bolstered risk appetite, but emerging Asian currencies failed to catch a ride as the dollar gained against a six major currencies. Among emerging market currencies, the Mexican peso was seen as the only clear winner with a near 2 percent jump because Trump's proposed policies are considered to be deeply negative for the country.
Investors also stayed cautions as the recent Trump's gain in polls may not have been entirely due to the FBI probe into Clinton's use of a private server for emails while engaged in government matters.
"We see EM Asian currencies declining due to the USD's broad rebound. Markets still worry about the uncertainties over the US election," said Qi Gao, FX strategist for Scotiabank in Singapore. "Emerging Asian currencies could rebound only if Clinton wins. But such rises could be a temporary one as markets will shift focus to the Fed rate hike," Gao said.
The US Federal Reserve is widely expected to raise interest rates in December after a government report on Friday showed solid jobs gains and a rise in wages in October. The Chinese yuan hit a one-week low as the People's Bank of China set its daily guidance rate weaker, reflecting the greenback's strength. The Singapore dollar was set to post the largest daily loss in near three weeks as investors cut holdings in the relatively safer currency in the region.
The South Korean won gave up much of its earlier gains as foreign investors kept selling Seoul shares and after a large bond outflows in October. The Singapore dollar lost 0.4 percent against the US dollar, which would be the largest daily loss since October 20. The Singapore dollar usually tracks those peers as traders and analysts believe them to be a part of the undisclosed currency basket used by the Monetary Authority of Singapore to manage monetary policy.
Despite a deepening domestic political crisis, the won earlier appreciated as much as 0.5 percent to 1,138.0 per dollar as global risk appetite improving. Tens of thousands of people attended a mass protest against President Park Geun-hye on Saturday, and her approval ratings are at an all-tme low due to an influence peddling scandal that has rocked her government. A South Korean court said on Sunday it had issued arrest warrants for two former presidential aides. The won lost some of its earlier gains as foreign investors were set to become net sellers in the local equity market for a fourth straight day.