The South Korean won and the Malaysian ringgit slid on Tuesday as short-term speculators reduced positions, with the slowing global economy putting pressure on emerging Asian currencies and reinforcing views that regional central banks will hold off on further policy tightening.
Australia's central bank held interest rates steady as expected and sounded in no jury to raise them, while lower-than-expected inflation in the Philippines cast doubt over the chances of a rate hike by Bangko Sentral ng Pilipinas' (BSP) next week. Two central banks in Asia - the Bank of Korea and Bank Indonesia - are set to hold rate policy meetings later this week. The one-year won interest rate swap (IRS) rate and the two-year IRS slid to lowest since mid-March, while South Korea's treasury bond futures rose.
The ringgit suffered as interbank speculators covered dollar-short positions and fixing-related dollar demand. The Malaysian currency softened to as weak as 3.0155 per dollar, breaking through a 55-day moving average of 3.0132 and the top of daily Ichimoku cloud of 3.0142.
But it erased some losses and remained firmer than the lines. The won eased 0.2 percent against the dollar as offshore investors covered dollar-short positions and importers' dollar bids. Indonesian central bank in April announced it will lengthen the SBI holding period to six months from one month as it seeks to drive volatile "hot money" flows to longer-term instruments and finance the real economy. The peso turned higher as local and foreign interbank speculators bought it. Earlier, the Philippine currency weakened to as soft as 43.310 per dollar, after slower-than-expected inflation data in May.