Rising bond yields, oil prices hammer Asian currencies

India's rupee and the Indonesian rupiah fell hard on Tuesday, plumbing depths not seen for more than a year, as a combination of rising US yields and oil prices hurt Asia's higher-yielding currencies. The Indian rupee fell to 67.2 against the dollar, its lowest since February last year, while the Indonesian rupiah hit 14,403 - its lowest since December 2015.
The dollar index firmed 0.1 percent firmer to 92.849 at 0504 GMT as rising Treasury yields and broadly strong US economic data backed sentiment.
US President Donald Trump's impending decision on whether to withdraw the United States from the Iran nuclear deal, a move that could disrupt global oil supply, has kept investors braced for turbulence, said Christopher Wong, a Maybank senior forex strategist. He said if Trump pulled the United States out of the Iran deal and re-imposed US sanctions, heightened geopolitical tensions could add upward pressure on oil prices.
"This could continue to punish the currencies of net oil-importing countries such as India, Indonesia and Philippines, which are also suffering from twin (trade and budget) deficits."
The Chinese yuan was marginally lower after April trade data showed a wider-than-expected trade surplus. Its trade surplus with the United States also expanded in April, customs data showed.
The Taiwan dollar touched its lowest in four months ahead of data due later in the day expected to show inflation at 1.7 percent in April from 1.6 percent in March.
The rupee was weaker, touching its lowest since February last year.
India's 10-year benchmark bond rallied early on Monday after the central bank unexpectedly announced last week it would buy 100 billion rupees ($1.49 billion) of sovereign bonds via open market operations
"The Indian authorities extended another helping hand to rein in bond yields and contain volatility," DBS Group Research said in a note.
"The timing comes as a surprise... likely driven by a need to dampen yields and minimise the impact of foreign debt outflows."
Hitting its lowest since Dec 2015, the rupiah extended losses after disappointing first-quarter economic growth data on Monday. The number came in below expectations and below the previous quarter's growth rate.
"Sluggish growth could limit Bank Indonesia's ability to lift interest rates to restore financial stability," Mizuho Bank said in a note.
Indonesian bond yields also rose on Tuesday as prices fell, with the benchmark 10-year bond yield at 7.089.
The central bank has persistently sold dollars to put a floor under its currency.
The Malaysian ringgit was near a four-month low on Tuesday ahead of elections.
Malaysia's Prime Minister Najib Razak and his ruling Barisan Nasional coalition face their toughest general election yet on Wednesday with an unprecedented challenge from Mahathir Mohamad, Najib's former mentor turned opposition leader.
Mizuho added that downside risks to the currency, from anything other than improved Barisan Nasional standings, were significant.
It noted that a slimmer simple majority could drive a modest ringgit dip, while an unexpected hung parliament or outright Barisan Nasional loss could lead to a sharper ringgit selloff from initial policy and political uncertainty.