Slowing growth, inflation worries hurt Asia FX; ringgit leads

[SINGAPORE] Emerging Asian currencies slid on Wednesday as rekindled concerns over slowing global growth and inflation hurt risk sentiment, while a retreating yen caused investors to unwind bullish bets on regional units.

Malaysia's ringgit hit a five-week low, leading regional losses, as disappointing manufacturing activity in the globe as well as downgrades to growth and inflation by the European Commission hurt commodity prices.

The Philippine peso touched a two-month trough on growing concerns over political uncertainty ahead of a presidential election on May 9.

The Indonesian rupiah eased as economic growth in the first quarter disappointed.

South Korea's won fell to its weakest in nearly three weeks as the dollar broadly rose, with the yen slipping from an 18-month peak.

"It's both temporary correction or squaring of positions ahead of event risks such as US jobs data for this week," said Sean Yokota, head of Asia strategy at Scandinavian bank SEB in Singapore, referring to weakness in Asian currencies.

Mr Yokota said regional units may depreciate further as the dollar could strengthen in the next one to three months on improving US economic data. He said the won will lead the regional weakness as he expected South Korea's central bank to cut its policy interest rate at its next meeting on May 13.

The ringgit lost as much as 1.5 per cent to 3.9850 per dollar, its weakest since March 30.

The Malaysian currency lost ground in overnight non-deliverable forwards markets, tracking slides in oil prices.

Traders cut bullish bets on the ringgit, the best-performing emerging Asian currency so far this year.

A senior Malaysian bank trader in Kuala Lumpur said the ringgit may weaken to 4.000 per dollar, saying: "reserve managers' inflows have already tapered off towards end April with funds having covered their underweight positions." The peso slid 0.6 per cent to 47.12 per dollar, its weakest since March 3, as traders saw dollar demand from some custodian banks.

Among the Philippine presidential candidates, Rodrigo Duterte, a tough-talking mayor, has kept his double-digit lead in opinion polls with five days to go before the election, despite allegations he had undeclared millions of pesos in a bank.

"PHP weakened today dragged by overall strength in USD, but negative sentiment persists on the political front," a senior Philippine bank trader in Manila said.

The peso lost 1.7 per cent in April, underperforming regional peers, on fears that whoever wins could find it difficult to generate the economic momentum built up during President Benigno Aquino's single six-year term.

The Philippine currency on Wednesday pared some of earlier losses as exporters and other local companies bought the currency when it was weaker than 47.00, traders said.

The won slumped 1.3 per cent to 1,155.3 per dollar, its weakest since April 15, tracking its weakness in non-deliverable forwards.

The South Korean currency pared some of its earlier losses as foreign investors were net buyers in both of the local equities and bonds.

Traders also cut some of bearish bets on the won as domestic financial markets will be closed on Thursday and Friday for holidays.

REUTERS