Most emerging Asian currencies dipped on Friday to take back some of their weekly gains, hurt by a combination of unhelpful regional politics and lingering concerns about a contentious US presidential election race. The South Korean won slumped amid a deepening political crisis involving President Park Geun-hye whose approval rating has plummeted to an all-time low of mere 5 percent. Foreign investors sold Seoul shares and local bonds.
Indonesia's rupiah hit an over six-week low ahead of a protest by hard-line Muslim groups against the Jakarta governor, a Christian and the first ethnic Chinese in the job. The Malaysian ringgit eased on weaker-than-expected September exports data. The dollar inched off from recent lows against a basket of six major currencies, helped by expectations the October US jobs data may add to the case for a Federal Reserve's interest rate hike in December. Still, the dollar's upside is expected to be contained by worries over the tightening US presidential race, analysts and traders said. Just days out to the November 8 vote, Democrat Hillary Clinton's lead over Republican Donald Trump in the polls has appeared to dwindle after the re-emergence of a controversy over her private email server.
"We are mired in a classic market reaction that is driven by fear and uncertainty," said Stephen Innes, senior FX trader for FX broker OANDA in a note. "The current climate with extraordinary political risk is not for the faint at heart and finding prudent investment opportunities in currency markets may prove challenging as everyone is interpreting some element of the ticker tape differently."
Anxiety over a possible victory for Trump has rattled investors over the past week, as there is great uncertainty on his stance around trade, foreign policy and immigration. By contrast, Clinton is seen as the status quo candidate by markets. The Republican's protectionist bent on trade was of particular worry for Asia.
"That could result in growth forecasts being downgraded at least in the short term due to investor uncertainty, which will in theory weaken the demand for commodities like oil," said a senior Malaysian bank trader in Kuala Lumpur, referring to a possible Trump's victory.
Most emerging Asian currencies were poised to report weekly increases on the dollar's retreat even as a potential Trump win capped their gains. China's yuan was a clear beneficiary among regional units, having gained 0.3 percent so far this week. That would be the largest weekly appreciation since late July. The renminbi's strength helped the Singapore dollar and the Taiwan dollar post 0.6 percent gains each in the week.
The won has appreciated 0.3 percent so far this week, but sentiment remains fragile amid the political turmoil. South Korea's President Park earlier made another apology on Friday over the scandal that has engulfed her administration, adding she will cooperate with prosecutors in their investigation.
"Political uncertainties at home and abroad appeared to cause offshore funds to maintain long dollar positions," said a foreign bank currency trader in Seoul. The rupiah was set to post weekly losses. The Indonesian currency has slid 0.2 percent against the greenback so far this week with hitting 13,110, its weakest since September 21, earlier on Friday. "The weakness is due to the planned rally. If there are riots today, that will surely affect sentiment," said a Jakarta-based currency trader.
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