Most emerging Asian currencies lost ground on Thursday on growing concerns over a global economic slowdown, while explosions and a gunfight in Jakarta hit the Indonesian rupiah. The rupiah touched a one-week low after several explosions went off and gunfire broke out in Indonesia's capital. China's yuan slid although the central bank set its daily guidance rate for the currency firmer in continuous efforts to stabilise it.
"A key focus is on the China market. Despite keeping the fixing flat, CNY weakens, which shows that the underlying weakening pressures are very strong," said Sean Yokota, head of Asia strategy for Scandinavian bank SEB in Singapore. "The yuan will weaken on both the economic slowdown and the policy uncertainty. It will drag the rest of Asia FX lower." South Korea's won hit a 5-1/2-year low, while the Philippine peso fell to its weakest in more than six years, on falling stock markets.
Asian equities markets slumped, tracking steep losses in Wall Street as Brent crude oil skidded to 12-year lows amid a commodity rout that increased fears of a global economic slowdown. The rupiah fell 1.0 percent to 13,960 per dollar, its weakest since January 7. Foreign banks dumped the currency following news of explosions and a gunfight in Jakarta. Local shares extended losses to nearly 2 percent.
Indonesia's police said militants launched a gun and bomb assault killing at least six people in the centre of the Indonesian capital in an attack that followed a threat by Islamic State fighters to put the country in their "spotlight". "The safety for investments in Indonesia is the main issue right now," said a Jakarta-based currency trader, expecting further weakness in the rupiah. Still, the central bank may intervene to prevent the rupiah from falling past the 14,000 level, the trader added.
The Indonesian currency was already under pressure from expectations that Bank Indonesia may cut its policy interest rate later in the day. The won lost as much as 0.9 percent to 1,215.3 per dollar, its weakest since July 2010. Offshore funds scrambled to add dollar holdings as foreign investors continued to sell Seoul shares.
The foreign exchange authorities were suspected of intervening to slow down the won's weakness, but their dollar selling was not seen to be aggressive, traders said. "All foreign names were on the 'dollar-buy' side. The authorities had been spotted at an initial stage, but they were hardly seen after that," said a South Korean bank trader in Seoul. Currency traders shrugged off the central bank's decision to hold monetary policy unchanged, signalling it would stand pat for some time although it cut this year's economic growth forecast.
The peso slid 0.4 percent to 47.75 per dollar, its weakest since November 2009. Local companies bought the dollar to hedge their importation requirements and interbank speculators chased the greenback, traders said. The peso also weakened in most non-deliverable forwards. A senior Philippine bank trader in Manila said the peso would weaken further on a lack of confidence in China's stocks and concerns about the global economy. The currency may find chart support at 47.80, its low in November 2009, the trader said. Analysts said it also has another level of support at 47.90, the 76.4 percent Fibonacci retracement of its appreciation from 2008 to 2013.
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