Ringgit set for worst day in 6 months, Greek woes hit Asia FX
SINGAPORE, May 16 — The Malaysian ringgit is set to suffer its biggest daily loss in nearly six months on Wednesday, while its Asian peers also shed on expectation of further slides amid growing worries about Greece's exit from the euro zone.
The ringgit hit a four-month low on dollar-short covering, leading losses in emerging Asian currencies, and the South Korean won was the second worst-performer among regional units on foreign investor sales.
Investors stayed cautious over possible intervention by Asian authorities to defend their currencies with some of them technically seen excessively sold, but they are expected to stay weak, dealers and analysts said.
"Risk sentiment turned from bad to worse as Greece's decision for a re-election increased the chance of a possible exit from euro zone," OCBC Bank said in a note.
"Asian currencies continue to garner little support from net portfolio inflows and in fact have started registering net outflows of late. As such, expect the regional pairs to continue to look north in Asian trading."
On Tuesday, Athens failed to form a government and leftists, who oppose EU bailout terms, are expected to sweep to victory in a June election, deepening the continent's debt crisis.
That prospect dampened all risky assets including the euro and stocks. Oil prices also tumbled.
Emerging Asian currencies need to price in more the possibility of Greece's exit from the euro zone, dealers said.
"We won't see that happening anytime soon. But people will still react to the bad news," said a European bank dealer in Manila.
The ringgit fell 1 per cent against the dollar on Wednesday. If the Malaysian currency maintains the loss, that would be the largest daily per centage slide since Nov. 10, according to Reuters data.
The currency weakened to as soft as 3.1140 per dollar, the weakest since Jan. 18.
Its next target would be 3.1193, which represents a 61.8 per cent retracement of its December-February slide.
The won fell to 1,165.0 versus the greenback on dollar bids from offshore funds and as foreign investors are set to become net sellers in South Korean main stock market for an 11th consecutive session.
They offered a net 333.9 billion won (US$289.32 million) worth of shares after having dumped 2.2 trillion won during the previous 10 days. — Reuters