Asian currencies skid on dollar recovery

Most Asian currencies slipped on Wednesday as the dollar rebounded from a three-year low, with the Philippine peso shedding half a percent on concerns of widening trade deficit. The dollar index against a basket of six major currencies was up 0.2 percent at 90.569 after hitting its lowest since December 2014 at 90.113.
The peso extended its fall to its lowest in more than a month on higher dollar buying by corporates on Wednesday. Data out last week showed the Philippines' trade deficit rose to a record of $3.78 billion in November, putting the nation on track for its first annual current account deficit in 15 years.
The Indian rupee jumped more than a quarter percent on news that the government has cut its additional market borrowing requirement by 60 percent for the current fiscal year. The news sent benchmark 10-year bond yields down by 15 basis points. Indian bond yields have risen by more than 100 basis points since June last year on concerns that the government may overshoot its fiscal deficit target.
The South Korean won was down 0.5 percent on the day. Finance Minister Kim Dong-yeon said authorities will leave foreign exchange rates to market participants but take action if needed. The won gained more than 12 percent in 2017, making it the top performer among Asian currencies against the dollar. The Thai baht was flat on the day, after having gained 2 percent this year.
The central bank governor said on Wednesday that the bank has found "unusual speculation" in the baht from some local financial institutions, but noted recent strength in the currency is expected to have only a limited impact on exports. The Malaysian ringgit climbed on higher oil prices, before giving up some of its gains as the dollar recovered.
Some analysts said they expect markets to be cautious ahead of key events such as Germany's Social Democrat (SPD), European Central bank and Bank of Japan meetings later in the month. The Cboe Volatility Index, often referred to as Wall Street's "fear index", jumped to a six-week high on Wednesday. A higher index reflects dampening risk sentiment which undermines regional currencies. However, Khoon Goh, head of Asia research at ANZ Banking Group, is bullish on the outlook for Asian currencies. "Normally a rise in volatility tends to be a negative for Asian currencies, but in the current environment, we are seeing bigger period of dollar weakness that is more than offsetting the rise in the VIX," Goh said. China's yuan was flat after rising earlier in the day, as the central bank set its firmest midpoint in more than two years.