SINGAPORE: Most emerging Asian currencies slid on Thursday as the Federal Reserve struck a more hawkish tone than expected at its policy meeting this week, signalling confidence in the US economy after ending its bond-buying programme.
South Korea's won led losses among emerging Asian currencies on selling from offshore funds. The Indonesian rupiah fell with importers buying dollars for payments.
The Malaysian ringgit hit a seven-month low as government bond prices slid.
The greenback rose to the highest in 3-1/2 weeks against a basket of six-major currencies and US Treasury yields rose. The Fed in its policy statement on Wednesday underscored the improving US labour market, dismissing recent financial market volatility, European growth challenge and low inflation outlook.
Most emerging Asian currencies had risen earlier this week on expectations that the Fed may signal it would not hurry to raise interest rates amid concerns over slower global growth and weak inflation.
The US central bank's Federal Open Market Committee (FOMC) said borrowing costs would remain low for a "considerable time", but investors saw its view on the economy as hawkish.
"Today will be all about EM reaction to the hawkishly-biased FOMC statement," said Credit Agricole CIB in a client note, referring to the Federal Open Market Committee.
Thursday's underperforming emerging Asian currencies - the won, the rupiah and the ringgit - could weaken further for the day, Credit Agricole said.
Dariusz Kowalczyk, the bank's senior economist and strategist, however, said expectations for the global economic recovery next year could support the won and the ringgit.
"US will definitely grow faster next year, but also euro zone and EMs ex-Japan," he said, adding the bank is bullish on currencies of South Korea and Malaysia because their economic fundamentals are better than others.
WON
The won fell as offshore funds booked profits from the currency, which hit its strongest in more than a month on Wednesday.
South Korea's industrial output in September missed expectations, adding to uncertainty over a recovery in Asia's fourth-largest economy.
Still, the won pared some of earlier losses on exporters' demand for month-end settlements.
"Exporters' deals need to be cleared first," said a foreign bank trader in Seoul, when asked if the won could slide further.
RUPIAH
The rupiah fell as Indonesian stocks and most government bond prices fell.
The official Jakarta Interbank Spot Dollar Rate (JISDOR), which the central bank launched last year in an effort to manage exchange rate fluctuations, was fixed at 12,165 rupiah per dollar, weaker than Wednesday's 12,163.
RINGGIT
The ringgit lost as much as 0.5 percent to 3.2900 per dollar, its weakest since March 27, as investors cut long positions in the Malaysian unit amid lower bond prices.
"The market is caught wrong footed," said a senior Malaysian bank trader in Kuala Lumpur.
A rebound in the ringgit towards 3.2700-3.2800 will be good a chance to sell, the trader added.
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