Deepening worries about global growth hurt Asian currencies on Monday, particularly those of trade-dependent countries, with the Malaysian ringgit diving to its lowest in 2008 and the Singapore dollar to a five-month low. The Indonesian rupiah fell to a one-month low while the Philippine peso hit a two-week low of 44.485 per dollar as the latter's broad strength overshadowed the fall in the price of oil, which is one of Asia's biggest imports.
The dollar struck a six-month high against a basket of currencies as fund managers and investors unwound holdings of commodities and high-yielding currencies. Growth concerns were pushed to the fore by last week's remarks from the European Central Bank acknowledging that euro zone economies were slowing more than expected, and by suggestions the Australian authorities could be cutting rates.
Market participants seemed to be growing confident that the US dollar's 6-1/2-year decline had ended, said Sean Callow, a Westpac Bank strategist. "If this is true then the assumption that dollar/Asia must fall is being thrown into the dustbin," he said, adding that explained the profit-taking on Asian currency holdings.
"Westpac does not agree that dollar has formed a cycle low but right now that's where a good amount of money is being placed," he said. The ringgit hit 3.3255 per dollar, its weakest this year, and the Singapore dollar fell to the weaker side of 1.41 per US dollar briefly after the government lowered its growth forecast for the economy.
"The dollar buying seems a bit overdone, but the dollar is still rallying against the majors," said a trader in Kuala Lumpur. Central banks in Taiwan, Indonesia and South Korea were suspected of having intervened to defend their falling currencies. Jonathan Ravelas, chief market strategist at Banco De Oro Universal Bank in the Philippines, said the peso had also reacted to the dollar's broad strength.
"We are looking for a rally towards 44.50-45.00 levels in the near-term, following a near-term bottom at last week's low at 43.76," Ravelas said. Analysts at J.P. Morgan Chase said market positions were exacerbating the Asian currency selling, owing to stop losses being triggered on long positions in the regionals.
"The low yielding currencies from open economies most leveraged to global growth are taking the brunt of the impact, while less cyclical FX that also benefit from the oil price decline are being impacted the least," they said in a note to clients. "With positions still relatively flat and growth concerns rising, near-term momentum remain for these moves," they said.
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