Most Asian currencies fell against a firmer US dollar yesterday, with the Indonesian rupiah and the South Korean won declining the most, as intensifying panic over the coronavirus outbreak sent investors scurrying into the world's reserve currency.
The Singapore dollar weakened only slightly against the greenback. As of 5.30pm yesterday, the Singdollar was trading at 1.406 to the US dollar, down 0.09 per cent from its Thursday close, after earlier dipping 0.2 per cent.
Meanwhile, the Australian and New Zealand dollars lay bloodied at 11-year lows yesterday as panicked investors dumped currencies with exposure to global trade or commodities.
As the spread of the virus disrupts travel worldwide and almost shuts down some countries, markets have increasingly priced in the inevitability of a global recession.
Rate cuts and liquidity injections by central banks have failed to calm the mood, nor have pledges of fiscal stimulus by many governments.
That has led to a rush to ensure US dollar funding as the world's most liquid currency with the deepest debt markets.
The US dollar was also boosted by the Federal Reserve's move to inject US$1.5 trillion (S$2.1 trillion) in short-term liquidity and change the durations of Treasuries it buys to mitigate the coronavirus-induced economic stress.
"The overriding theme from the last 24 hours is that markets are hunting for US dollars, and don't really care what rates they pay to get them," Mr Jeffrey Halley, market analyst at Oanda, wrote in a note.
Reflecting the demand for the greenback, the benchmark US Treasury yields fell, he said.
In Asia, the Indonesian rupiah and the Korean won were the top losers as investors trimmed exposure to risky assets.
The rupiah, being one of the high-yielding emerging currencies, sees ample foreign investment, but risk aversion sparked by the pandemic has caused the recent unwinding, said Mr Sim Moh Siong, a FX strategist at Bank of Singapore.
Indonesia has been among the most proactive countries to roll out measures to shield its economy and currency, with the central bank purchasing bonds for two consecutive days and the Finance Minister introducing a second stimulus package.
The rupiah slid 2 per cent to its lowest since November 2018, while the won, whose movement is closely linked to its stock market, hit a four-year trough.
The trade-sensitive won benefited when the United States and China signed an interim trade pact earlier this year before worries of a global recession weighed on investor sentiment and led to heavy equity capital outflows, Mr Sim said.
The Thai baht, the Taiwan dollar and the Malaysian ringgit weakened between 0.1 per cent and 0.8 per cent.
The Australia dollar shed 3.9 per cent overnight in the largest one-day drop since mid-2010. It traded as low as US$0.62145 at one point, depths last visited in late 2008.
It was last hanging on grimly at US$0.6295, with the next major bear targets being troughs from October and November 2008 at US$0.6075 and US$0.6007.
The kiwi currency was huddled at US$0.6133, having lost 2.8 per cent overnight in the largest daily drop since 2015. It has some support at US$0.6075 and around US$0.6000.
Among gainers were currencies of oil-importing India and the Philippines, benefiting from an overnight drop in crude prices.
The Chinese yuan strengthened 0.7 per cent yesterday, and was on its way to mark its best session in more than a week.
Maybank analysts said that a combination of strong virus containment measures, hopes for a recovery in the economy and a recent dive in US rates enhanced the yuan's yield appeal, giving it a kind of immunity.
REUTERS
• Additional reporting by The Straits Times
