Emerging Asian currencies were all headed for a weekly loss as short-term investors cut positions on fading hopes for further US stimulus and after China signalled plans to make the yuan's trading range more flexible. The currencies came under renewed pressure this week after the US Federal Reserve failed to give any additional signals on further monetary easing to boost the economy, a move which would have increased global liquidity and boost demand for risky assets including the region's units.
"We get so many of these geopolitical noises from the Korean peninsula over the last few years that the market takes limited notice of it," said Sailesh Kumar Jha, head of Asia market strategy at SEB in Singapore. The South Korean won, along with other emerging Asian currencies, is expected to remain soft next week on a firm dollar, not because of tensions with the North Korea, he added.
The won lost 0.7 percent against the dollar this week, less than others such as the Malaysian ringgit, which has fallen 1.4 percent, according to Thomson Reuters data. The dollar has been supported by signs of a sustained recovery in the US economy. On Thursday, data showed new jobless benefit claims fell to a four-year low last week and manufacturing activity in the Northeast picked up this month.
Richmond Federal Reserve Bank's president Jeffrey Lacker said that he dissented against the central bank's decision this week to hold interest rates near zero until at least late 2014 because he thought rates would need to rise sometime next year. Investors have sharply cut bets in regional units already. They turned bearish on the Chinese yuan for the first time in nearly two years, and pessimistic on the Indian rupee and Indonesian rupiah, a Reuters poll showed on Thursday.
"Dollar/won may rise more but I don't expect much. Offshore funds appeared to have completed short-covering and risk sentiment has not been hurt," said a local bank dealer in Seoul. Interbank speculators cut long US dollar/Taiwan dollar positions in subdued trading, while US dollar demand from Taiwanese importers limited slide.
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