Most emerging Asian currencies gained on Thursday due to a weaker dollar, but the neck-and-neck battle for votes in the US presidential race kept investors on edge and away from riskier assets.
Regional currencies pared earlier gains on media reports that some agents at the Federal Bureau of Investigation wanted to press ahead with a probe of the Clinton Foundation, but senior officials at the agency and at the Justice Department did not think much of the evidence. The South Korean won led gains among emerging Asian currencies on suspected demand linked to Samsung BioLogics Co Ltd's initial public offering (IPO) last week.
Thailand's baht hit a two-week high after foreign investors added holdings in local bonds.
The dollar fell to near a one-month low against a basket of six major currencies as uncertainties over the election on November 8 overshadowed the Federal Reserve's latest policy review where policymakers suggested an interest rate hike next month.
Markets started pricing in more risk that Republican Donald Trump might defeat his Democratic rival Hillary Clinton. Sentiment on risky assets soured further, given Trump's uncertainties on the US economy, free trade and geopolitics. To Asia, the Republican was seen negative as his trade stance was perceived more protectionist than Clinton.
So, a weaker greenback failed to create follow-through demand on emerging Asian currencies. Maybank's analysts said the worst scenario in next week's US elections is Trump wins and the Republicans have a clean sweep of the Congress.
"We expect heightened levels of volatility, dampened risk sentiment and downward pressure on global financial markets. We expect an extended sell-off in risk proxies including high beta currencies," they said in a note, adding emerging Asian currencies are among them.
Investors were already losing nerve as some polls have shown Clinton's lead shrinking over the past week.
An average of polls compiled by the RealClearPolitics website showed Clinton just 1.7 percent ahead of her Republican rival nationally on Wednesday. Still, a Reuters/Ipsos daily tracking poll released late the same day showed her ahead by 6 percentage points among likely voters. The won advanced more than 1 percent on demand from custodian banks amid expectations of increasing bids for the currency after Samsung BioLogic's IPO.
The contract drugmaker on October 28 priced its IPO at the top of its indicative range, making the share sale South Korea's second-largest ever at 2.25 trillion won ($1.98 billion).
Foreign investors were estimated to take some $600 million in the IPO, according to securities sources.
The South Korean currency found further support from stop-loss dollar selling, traders said. Still, sentiment on the won remained bearish with a political crisis surrounding President Park Geun-hye deepening.
South Korean prosecutors have detained a former aide to Park, a prosecution official said earlier, the second person to be held in an influence peddling scandal that has rocked the country's presidency.
The baht rose as much as 0.3 percent to 34.90 per dollar, its strongest since October 20. Foreign investors added a combined net 20 billion baht ($572.7 million) worth of Thailand's bonds over the prior two sessions, according to data from the Thai Bond Market Association.
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