SINGAPORE (Reuters) - The rupee led declines in emerging Asian currencies on Wednesday despite broad weakness in the dollar as regional shares fell to their lowest in a month amid uncertainty over when the Federal Reserve will start scaling back stimulus.
The rupee fell on dollar demand from importers, while the Thai baht hit a one-month low on fears of political unrest.
The South Korean won declined as foreign investors continued to sell Seoul stocks.
The Malaysian ringgit and the Philippine peso also slid as investors cut bullish bets before a long weekend.
Such weakness came even as the dollar slid against major currencies, hitting a six-week low against the yen.
“Despite the broad dollar’s softness, Asian currencies may continue to remain under the weather if the equity backdrop is still deemed less than encouraging,” OCBC Bank said in a client note.
“Regional currencies may remain burdened by the relative underperformance of EM economies relative to developed economies and with net portfolio inflows into the region somewhat hesitant,” it added, referring to emerging markets.
The baht eased as much as 0.3 percent to 31.48 per dollar, the weakest since July 8 on worries about political risk.
Thailand’s parliament was due to debate a political amnesty bill on Wednesday as anti-government protesters marched to try to get it scrapped, saying it could let ex-premier Thaksin Shinawatra return from exile without having to serve a jail sentence.
Ten-year bond yields rose 3 basis points to 3.98 percent.
The government sold 3.85-year bonds in an auction of 14 billion baht at an average yield of 3.3193 percent, higher than a 3.2702 percent at the previous auction for similar issue on June 19.
Gross domestic product could expand only by 3.8 percent this year, down from a forecast of 4.3 per cent, if the current political tension escalates to severe disorder, according to the University of the Thai Chamber of Commerce, the Nation reported.
The won edged down as foreign investors continued to sell Seoul shares and on dollar demand from foreign banks.
Foreign investors sold 88.6 billion won worth of stocks in the main exchange .KS11 after unloading a net 152.4 billion won on Tuesday, according to Korea Exchange data.
South Korean exporters’ demand for settlements pared some losses, but traders stayed bearish on the won when it was stronger than 1,120 per dollar.
“The won is seen holding at firm resistance at 1,110, given Fed officials’ less dovish comments,” said a South Korean bank trader in Seoul.
Chicago Federal Reserve Bank President Charles Evans, who is typically among the most dovish policymakers, said on Tuesday that the U.S. central bank will probably reduce its bond-buying programme later this year.
The Philippine peso eased as speculators covered dollar-short positions before a long weekend in thin trading.
Financial markets in the country will be closed on Friday for a holiday.
The Philippine currency is expected to weaken further on dollar bids from local importers next week, traders said.
“After the weekend, I am expecting some corporate dollar demand to start to come out,” said a foreign bank trader in Manila.
The peso is seen heading to 44.00 per dollar after testing 43.75, the session low of July 8, the trader added.
The ringgit fell on dollar demand linked to daily fixing and selling against the Singapore dollar, traders said.
The Malaysian currency fell as much as 0.2 percent to 2.2670 per Singapore dollar, the weakest since 1998.
Three-year bonds yields also rose.
Traders also covered dollar-short position before holidays. Financial markets in Malaysia will be closed on Thursday and Friday.
Additional reporting by Yena Park in SEOUL and IFR Markets' Catherine Tan; Editing by Kim Coghill