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SEOUL: The Indonesian rupiah led losses among emerging Asian currencies on Thursday as Federal Reserve Chair Janet Yellen's surprisingly hawkish remarks raised expectations of an earlier US rate hike and worries about more outflows from the region.
Emerging Asian currency came under further pressure as the Chinese yuan fell to a one-year low against the dollar after the central bank set the daily midpoint sharply weaker.
The rupiah fell on weakness in the non-deliverable forwards (NDFs) markets overnight and on dollar demand from importers.
The Philippine peso fell amid higher government bond yields after the central bank governor gave a strong hint that interest rates may be hiked soon.
Malaysia's ringgit slid on proxy plays to bet a weaker renminbi.
Yellen said on Wednesday the Fed will probably end its bond-buying programme later this year and could start raising interest rates around six months later, dampening stocks and bond prices.
Her comments brought forward expectations of the start of actual tightening, which will put pressure on emerging Asian currencies, Credit Agricole CIB said in a client note.
"The rates market is repricing the timing for the first rate hike and also the path of Fed rate, nearer to the Fed's mean forecasts rather than the median," said Frances Cheung, head of Asian rates strategy at Credit Agricole CIB.
On Asian currencies, Cheung said: "those which are more prone to capital outflows could be affected more, i.e. those that have external deficits including India and Indonesia."
The rupiah and the Indian rupee have risen so far this year as improving economic fundamentals such as smaller current account deficits attracted foreign fund inflows.
RUPIAH
The rupiah fell on corporate dollar demand and as local stocks lost nearly 2 percent, underperforming regional peers.
The official Jakarta Interbank Spot Dollar Rate (JISDOR), which Indonesia's central bank launched last year in an effort to manage exchange rate fluctuations, was fixed at 11,407 rupiah per dollar, weaker than the previous session's 11,313.
"The rupiah is one of the most fragile currencies (in the face of the Fed's tightening)," said a Jakarta-based trader, adding he would sell the rupiah on rallies for a target of 11,500 per dollar.
PHILIPPINE PESO
The peso fell as investors rushed to sell the currency on its weakness in NDFs markets.
Ten-year government bond yield jumped to 4.571 percent, its highest since January 2012, from Wednesday's 4.258 percent.
Earlier, the central bank governor said that "measured" adjustments in monetary policy may be needed even though it expects inflation to stay within its target.
The Philippine currency's downside was limited as the central bank was spotted intervening to support the currency, traders said.
RINGGIT
The ringgit eased, while investors stayed wary of possible intervention by the central bank to limit its slide, traders said.
The Malaysian currency has a chart support around 3.2975 per dollar, a 55-day moving average, analysts said.
The 50.0 percent Fibonacci retracement of its January-March appreciation stood at 3.2973.
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