Most emerging Asian currencies lost ground on Monday, with the Malaysian ringgit trading at a 10-year low, as Greece looked to be heading for a default on its debt, causing investors to head for safer assets. China's central bank cut lending rates on Saturday for the fourth time since November and trimmed the amount of cash that some banks must hold as reserve, but investors focused more on the Greek debt saga.
The ringgit came under additional pressure due to concern that Fitch Ratings may downgrade Malaysia's credit rating due to the debt problems of state fund 1MDB. South Korea's won slid to a 3-1/2-month low, while the Indonesian rupiah fell to around a 17-year trough. Emerging Asian currencies are likely to stay under pressure due to a strong US dollar and growing risk aversion, with the prospect of Greece being forced out of the euro, analysts said.
"The stronger USD outlook coupled with risk-off sentiment emanating from Greek risks is clearly negative for Asian FX," said Heng Koon How, Credit Suisse Private Bank's senior currency strategist in Singapore. "Particularly, we are negative on MYR because of an imminent sovereign credit rating downgrade," he said, referring to the ringgit. Cash-strapped Greece looks certain to miss its debt repayment to the International Monetary Fund on Tuesday as its European partners decided not to extend a credit lifeline after Athens' surprise move to hold a referendum on bailout terms.
The euro lost almost 2 percent and stock prices tumbled across Asia. The ringgit lost 0.4 percent to 3.7830 per dollar, its weakest since July 2005. Malaysian companies bought the dollar for month-end payments, hurting the local currency further. The Malaysian unit's downside was limited by caution over possible intervention by the central bank to support the worst-performing Asian currency so far this year.
The won fell nearly 1 percent at one stage to 1,127.9 per dollar, its weakest since March 18. The South Korean currency pared some of its losses as exporters chased it for month-end settlements, and that caused some traders to cover short positions in the won.