Most Asian currencies hit by sell-off over Italy

Most Asian currencies fell on Monday, with the Philippine peso weakening to its lowest in nearly 12 years, as Italy's deepening political crisis triggered a sell-off in global markets, rocked the euro and aided the dollar. Risk-off sentiment prevailed as investors feared repeat elections in the euro zone's third-largest economy - which could come as soon as July - may be a de-facto referendum on Italian membership of the currency bloc and Italy's role in the European Union. Italy has searched for a government since inconclusive March elections.
This took the euro to 10-month lows, and helped the greenback stay steady at 94,844 at 0446 GMT. Among regional currencies, the Philippine peso hit its lowest since July 2006. Souring Sino-US relations added to investor woes as it rekindled trade-war fears after China expressed surprise and said it was ready to fight back at the White House's decision to go ahead with the $50 billion worth of tariffs on Chinese imports, unless Beijing addresses the issue of theft of American intellectual property.
This development came after the two sides agreed earlier this month to look at steps to narrow the US trade deficit with China, and days ahead of a visit to the Chinese capital by US Commerce Secretary Wilbur Ross for further talks. The Chinese yuan was at its lowest since mid-January at 6.427 per dollar after breaching the psychologically important 6.4 level on Tuesday. The central bank lowered the yuan midpoint for a fifth straight day on Wednesday to the weakest level in 4-1/2 months.
The South Korean won slipped for a second session. The latest development, of a top North Korean official heading to New York for talks with the U.S secretary of state, affirmed possibilities of a summit between leaders of the two nations. The Malaysian ringgit continued its fall after a market holiday on Tuesday, weakening to its lowest in 4-1/2 months.
"The Malaysian ringgit will continue to be in the no-trade zone for foreign investors who were showing little appetite for Malaysia bond and equities prior the Italian meltdown and are even more unlikely to do so with the risk aversion gripping market," Stephen Innes, head of Asia-Pacific trading for Oanda, said in a note. "And one look at the technical overlay on oil prices should reinforce that view."
Bearing bad news for Malaysia, a net exporter of oil, prices fell on Wednesday on supply glut concerns. The Thai baht lost the most among regional currencies, down 0.4 percent. April manufacturing data was broadly in-line with expectations, and did not cheer investors amid the broader sell-off. The Indonesian rupiah was flat as its central bank held an off-cycle meeting at which it is expected to raise interest rate for the second time in two weeks.
Bank Indonesia (BI) earlier this month hiked the benchmark rate by 25 basis points in an attempt to support the weakening currency and curb capital outflows. BI Governor Perry Warjiyo said the meeting was a pre-emptive stance ahead of the US Federal Reserve's June meeting. The Fed is expected to then raise rates. "Though capital outflows from the region seemed to be a bit stretched relative to fundamentals, we would not rule out the probability that BI could tighten again this year should volatility resurface," Mizuho Bank said in a note.