Offshore funds continued to cut exposure to emerging Asian currencies on Friday as global market turmoil triggered a flight to US dollars, leaving the Singapore dollar set for its worst weekly decline ever and prompting widespread intervention by regional authorities to slow their currencies' declines.
Asian foreign exchange authorities were spotted selling dollars to support their currencies as investors withdrew from riskier assets amid persistent worries about the eurozone's debt crisis and the slackening global economy. Earlier in the day, South Korea's Finance Ministry and central bank issued a rare joint statement pledging to defend the currency, and the authorities were actively buying it, especially in the minutes before local market closed.
The Singapore dollar lost 4.3 percent against the US dollar this week, its biggest-ever weekly decline, according to Reuters' calculations based on the central bank's data. The Taiwan dollar fell 2.6 percent, its largest weekly fall since February 1999. The won turned higher as authorities were spotted selling dollars minutes before the domestic market closed. Foreign investors sold a combined net 1.04 trillion won ($881.5 million) in main stock market and treasury bond futures.
The Singapore dollar gained 0.8 percent on the day as agent banks of the central bank were spotted selling US dollars, taking advantage of thin liquidity. The rupiah's market remained thin with dollar liquidity extremely poor. Banks made prices in spreads of bid and ask at 100 pips at least, dealers said. It is usually about 3 pips.
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