Most emerging Asian currencies fell on Thursday as the US Federal Reserve appeared on track to raise interest rates this year while there are risks that regional central banks instead may ease monetary policies. The Malaysian ringgit hit a near six-year low as an overnight slide in oil prices highlighted concerns that slumping crude will hurt the country's current account surplus and increase its fiscal deficit.
South Korea's won touched a near four-week low as offshore funds sold it, while Taiwan's dollar slid on short-covering in the US dollar. The Singapore dollar, however, rebounded on caution over potential intervention by the central bank to support it. Still, its outlook stayed pessimistic after Wednesday's unexpected monetary policy easing.
The Fed said on Wednesday the US economy was expanding "at a solid pace" with strong job gains, signalling that the central bank remains on track with its plans to hike borrowing costs in 2015. "With the Fed's healthy economic assessment, Asian currencies may stay under pressure for the time being," said Yuna Park, a currency and bond analyst at Dongbu Securities in Seoul. "Asian countries may take similar policy stances with Singapore's move through driving their currencies weaker," she said.
Prior to the Fed statement, emerging Asian currencies had been supported, partially due to some expectations it might take a dovish stance at a time other central banks have eased policy amid fears of deflation. The ringgit fell 0.5 percent to 3.6350 per dollar, its weakest since April 2009.
The Malaysian currency's depreciation accelerated as a break of the previous low of 3.6250 hit on January 21 spurred selling, traders said. The unit pared some of its losses on caution over possible intervention by the central bank to support the currency. Traders largely ignored the central bank's decision on Wednesday to keep interest rates unchanged, which was expected. The won lost as much as 0.9 percent to 1,094.7 per dollar, its weakest since January 9.
Offshore funds' offers caused local traders to cut their won holdings. Some traders dumped bullish bets on the won, which they had built up on expectations of more demand from exporters for month-end settlements. The Taiwan dollar slid as traders covered short positions in the US dollar after the Fed's statement. Importers also bought the greenback for payments, while exporters stayed away on expectations of further strength in the US dollar.
Traders remained cautious over possible intervention by the island's central bank, saying that near the local market closing time on previous sessions, the authority was spotted selling the Taiwan dollar to stem its strength. The Singapore dollar gained amid caution over possible intervention by the central bank to support it after a surprise easing sent the unit to a near four-and-a-half year low on Wednesday. Still, the city-state currency is expected to remain weak, analysts and traders said.
"In a nutshell, expect the latest policy easing to continue to put the hurt on the SGD, keeping the currency on lockdown as a relative underperformer in the region," said Emmanuel Ng, a foreign exchange strategist with OCBC Bank, in a client note. Economists revised downward their forecasts for the Singapore dollar. Edward Teather, a senior economist with UBS, said the investment bank revised its end-2015 forecast for the Singapore dollar's value against the greenback to 1.4000. Tim Condon, head of Asia research at ING, also said it changed its year-end forecast to 1.4100 from 1.3600.
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