Asian currencies are on a losing streak against the US dollar, as increasingly dismal global economic outlook prompts a flight to safety to greenback-denominated assets.
“The poor risk sentiment is exacerbating the move towards safe haven assets such as the US dollar,” a dealer told StarBizWeek. “This is evident in the widespread sell-off in the region's capital markets,” he added.
Among Asian currencies, the won was the worst performer, having lost 4.73% from a week ago to 1,167.37 per US dollar yesterday. The Hong Kong dollar is pegged to the US dollar, while the yuan trades in a managed float against the greenback.
The ringgit registered a slump of 2.69% from a week ago to 3.1672 per US dollar. That was the weakest level since July 2010.
Bank Negara Malaysia governor Tan Sri Zeti Akhtar Aziz in an interview with Washington-based Emerging Markets Newspapers said South-East Asian economies were now better equipped to withstand the volatile capital flows. “We are seeing very significant surges in capital outflows and reversals,” she was quoted as saying.
“Previously it destabilised us quite significantly. But in the current environment, these flows are better intermediated by emerging economies,” she added, citing more resilient financial institutions, more developed financial markets, higher reserve levels and a more flexible exchange rate.
Zeti also reiterated that the central bank now had a wider number of instruments to absorb and sterilise inflows to prevent the formation of asset bubbles.
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