Rupee, Malaysian ringgit lead Asia FX falls before US data

The rupee and the Malaysian ringgit led a slide among emerging Asian currencies on Tuesday.

 

The dollar firmed in advance of potentially strong retail sales US data later in the day that could beef up expectations of an imminent reduction in Federal Reserve stimulus.

 

The rupee fell on a contraction in factory output growth in June, with the government's additional measures to curb the current account deficit and attract foreign fund inflows having little impact.

 

The ringgit and the South Korean won slid on selling from offshore funds. The Philippine peso eased as exports growth in June missed some investors' expectations.

 

Investors are awaiting July US retail sales, which likely grew 0.3% after a 0.4 increase in June. A strong number is seen as likely to cement expectations that the Fed could start scaling back its bond-buying programme as early as September.

 

The 10-year US Treasury bond yield rose to 2.6341% in Asian trading.

 

"Treasury yields are picking back up to provide a bit of support, while the emerging markets space is not looking too favourable," Sacha Tihanyi, a senior currency strategist at Scotiabank, said in a note to clients.

 

Emerging Asian currencies have been weaker on expectations that the Fed may start cutting back quantitative easing, which had lifted asset prices in the region.

 

RINGGIT

 

The ringgit fell as interbank speculators added dollar holdings.

 

But the Malaysian currency pared some of its initial slide as investors saw support at 3.2600 per dollar, the session low of July 1, 2010, which some market players see as an inflection point for the central bank to intervene.

 

Some traders said the authority was spotted at 3.2590.

 

"For the short term, I prefer a short dollar position here. We need a catalyst for Asian weakness to break 3.26," said a senior Malaysian bank trader in Kuala Lumpur.

 

WON

 

The won eased on dollar demand from local importers.

 

Investors say the South Korean currency faces strong resistance at 1,110 per dollar, a level at which it has not closed above in three months.

 

Still, the won recovered some of earlier losses as foreign investors turned net buyers in Seoul stocks.

 

Exporters and offshore funds also bought the currency on dips, traders said.

 

"The won may weaken further, but not today, given mixed flows from exporters and importers around mid-1,110," said a foreign bank trader in Seoul.

 

PHILIPPINE PESO

 

The peso fell as much as 0.3% to 43.805 to the greenback, the weakest since June 24 despite data showing Philippine June export growth hit a six-month high.

 

Traders said domestic and foreign banks sold the currency as the growth of 4.1% was below expectations.

 

Barclays said it had expected 7% rise while market expectations were 8%.

 

The peso ency recovered some losses on short-covering and market talk of intervention to sustain the currency, but it is expected to stay under pressure, traders said.

 

"The market is expecting some mid-month corporate dollar demand this week. I am looking at the market eventually testing 44.00," said a foreign bank trader in Manila.