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Emerging Asian currencies fell to multi-year lows on Wednesday after China's central bank allowed the yuan to drop for the second straight day to a four-year trough, a move sparking fears of a global currency war.
The yuan fell to as low as 6.4301 per dollar, its lowest since August 2011, after the People's Bank of China weakened its daily yuan midpoint by 1.6%.
The People's Bank of China, which described the devaluation as a one-off step to make the yuan more responsive to market forces, sought to reassure financial markets it was not embarking on a steady depreciation.
Still, China's move is not seen as a one-off measure and the renminbi is seen sliding further and driving its regional peers weaker, analysts said.
China took Tuesday's step after disappointing economic data indicated to economists that further stimulus was needed to revive growth in the world's second-largest economy.
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"It wasn't meant to be one-off for sure and there will be further depreciation until the PBOC stabilises the spot to re-align with the fixing, which requires more significant intervention effort," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.
In the meantime, Ji added, the US dollar "will march on", strengthening further against Asian currencies.
China's devaluation bolstered expectations that other Asian countries may let their currencies weaken to support their economies, as long as the pace of depreciation is not too fast.
The Malaysian ringgit weakened past a psychologically important 4.0000 per dollar level to hit a fresh 17-year pre-peg low. Indonesia's rupiah also fell to a level not seen since July 1998.
The Singapore dollar, the Taiwan dollar and the Philippine peso all touched five-year troughs.
South Korea's won slid to near a four-year low.
Financial markets in Thailand are closed for a holiday.
