Emerging Asian currencies ended the week lower, led by the Singapore dollar and the Malaysian ringgit, as investors on Friday sought to reduce risk by cutting exposures to these currencies and their stocks. Most of the currencies weakened past Fibonacci retracement levels of their gains which began in late June when investors resumed bringing money into the region as worries about eurozone's debt crisis temporarily eased.
The breaks, along with increasing worries about contagion fears in Europe and another recession in the United States, Asia's major export market, are expected to put more pressure on emerging Asian currencies, analysts and dealers said. Gains in emerging Asian currencies already slowed last week on worries about sovereign crisis in the United States and the eurozone.
Concerns over a potential US default waned, but worries about a slowing US economy and the eurozone's debt crisis forced investors to reduce exposure in emerging Asian currencies further. Earlier, the Philippine central bank's deputy governor said it participates in the foreign exchange market to dampen volatilities.
Some dealers and analysts said South Korean foreign exchange authorities were suspected of selling dollars earlier in the day and during the overnight non-deliverable forwards market. The ringgit, which lost up to 1.4 percent against the dollar this week, was the worst performer among emerging Asians, its biggest weekly loss since May 2010. Interbank speculators covered dollar-short positions, breaking through the ringgit's 61.8 percent Fibonacci retracement level of its appreciation between late June and early August.
Earlier, Goldman Sachs recommended closing short dollar/ringgit and dollar/Philippine peso positions on worries about global economic slowdown and European fiscal problems while inflation in Malaysia and Philippine is seen slowing. The Philippine peso slid on foreign banks' sales, especially during early session.
The peso weakened to as soft as 42.75 per dollar, breaking through the 38.2 percent Fibonacci line of its appreciation between late June and early August. The South Korean currency also weakened past the 61.8 percent Fibonacci retracement line of its appreciation between late June and early August.
Foreign investors bought a net 1.93 trillion won ($1.82 billion) in South Korean treasury bond futures during the day. That compared with foreigners' net stocks sales value of about 2 trillion won during the recent four consecutive sessions. The rupiah weakened past 8,651 per dollar, the 61.8 percent retracement level of its appreciation since late June and it has room to soften further, probably to 8,585, the 76.4 percent retracement. "Tonight, we will see another correction (in IDR) after the NFP announced," said a Japanese bank dealer in Jakarta, referring to the US non-farm payrolls.