Most emerging Asian currencies rebounded on Thursday as Chinese stocks turned higher, easing concerns over its market rout for now, while Malaysia's ringgit edged up as authorities again intervened to prop up the regiona's worst-performing unit. Chinese shares started the day sharply lower with CSI300 index down more than 3 percent earlier, indicating a market meltdown is not over yet. The country's stocks have lost about 30 percent over the last three weeks.
But they reversed the direction as authorities continued to take measures. Late on Wednesday, China's securities regulator ordered shareholders with stakes of more than 5 percent from selling shares for the next six months. State news agency Xinhua said Chinese police on Thursday visited the regulator to investigate clues that suggest "malicious" short-selling of stocks.
The rebound in Chinese stocks caused investors to cut bearish bets in emerging Asian currencies, but such position adjustments in regional units are unlikely to last long, given slowing growth, analysts said. "At this point, sentiment is slightly better, but the Chinese stock market is really volatile," said Irene Cheung, senior FX strategist for ANZ in Singapore.
"We are still having actually pretty poor economic numbers in Asia as a whole. It's not going to help Asian currencies. I would actually be still looking to buy dollar/Asia on the back of fundamental reasons." China's consumer inflation edged up in June, but stubbornly weak producer prices fell again, adding to worries that the world's second-largest economy is not out of the woods yet, especially amid the stock market rout. South Korea's central bank also downgraded its growth forecast for this year to 2.8 percent from 3.1 percent previously forecast due to the outbreak of Middle East Respiratory Syndrome and poor exports.
The ringgit rose as the central bank was spotted intervening around its session low of 3.8080 per dollar, traders said. The authority has been seen keeping the ringgit firmer than a 16-year low of 3.8100 as corruption allegations swirl around Prime Minister Najib Razak, traders said. The Malaysian currency extended gains as traders covered short positions on the rebound in China's stocks.
Still, some traders sold the currency on rallies as political tensions swirled over Najib and debt-laden state fund 1MDB. Investors were awaiting the central bank's monetary policy meeting later in the day. Bank Negara Malaysia is widely expected to keep its policy interest rate unchanged, but investors were keeping an eye on its stance on the recent market slides. The won earlier fell as much as 0.3 percent to 1,140.0 per dollar, its weakest since July 2013, on dollar demand linked to recent foreign stock selling. Foreigners were set to become net sellers in Seoul's main stock market for a fifth consecutive session. They have dumped more than 1.0 trillion won ($881.3 million) worth of shares in total during the five sessions, the Korea Exchange data showed. The South Korean currency, however, turned firmer as higher Chinese stocks caused stop-loss dollar selling among local traders.
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