Most Asian currencies fell against the dollar on Wednesday, led by a sell-off in the Indonesian rupiah and Philippine peso, as surging US bond yields lured investors away from riskier assets. The high-yielding rupiah slipped to the weaker side of 9,000 per dollar, after a sharp rebound in the previous session.
It fell as low as 9,110, which was down 1.5 percent from late Asian trade on Tuesday. The Malaysian ringgit fell 0.7 percent to 3.470 per dollar. The peso, another high-yielder in Asia, fell to 46.70 per dollar, down more than 1 percent.
"The rupiah and peso always get hit when we have an adjustment in risk aversion. Still, we would expect them to recover again in the 1-3 month perspective," said Magnus Prim, chief Asia currency strategist at SEB.
"We are looking for increased volatility overall ahead." A dealer in Manila said he believed the peso could weaken further towards the 46.75 per-dollar level in the near-term if market concerns about rising global interest rates persisted.
The rupiah, peso and ringgit had been strong on Tuesday as risk appetite returned from a sell-off last week. But on Wednesday, the dollar soare to a 4-1/2-year peak against the yen and an 11-week high versus the euro after US bond yields surged.
The yield on benchmark 10-year treasuries rose to more than 5.3 percent in Asia on Wednesday, a five-year peak. Bucking the weaker trend in Asian currencies, the Chinese yuan hit a post-revaluation high of 7.6260 per dollar, rising almost 0.5 percent in two days. China is under increasing pressure to relax its control over the yuan, the latest being planned bills by US senators to try to force Beijing to push the yuan higher at a faster rate.
US Treasury Secretary Henry Paulson said on Tuesday that dialogue and negotiation with China were the best ways to achieve more flexibility in the valuation of the yuan currency, not legislation.
The US Treasury is due to issue a semi-annual report on foreign currency practices on Wednesday, but is not expected to identify China as a manipulator. "We have not altered our forecast of 5 percent annual appreciation," he said. The yuan has gained 2.33 percent versus the dollar so far this year, making it the fourth-best preforming currency in Asia after the Indian rupee, peso and the Thai baht.