(Bloomberg) — Policy makers in Asia pushed back against a surging dollar, seeking to stem losses as their currencies teetered on the brink of key levels that may trigger more selling.
Officials in Japan and South Korea ramped up the rhetoric, while China’s central bank set the daily reference rate on the yuan at the strongest bias on record.
Authorities in Asia are squaring off with traders who bet that regional currencies will continue to slide as more aggressive Federal Reserve tightening boosts the dollar. But a depleting stock of foreign reserves may limit the ability of central banks to fight against a surging greenback.
“It’s really about King dollar — no one can really beat them in tightening and they have the data to support them,” said Eddie Cheung, strategist at Credit Agricole CIB in Hong Kong. Policy makers in Asia are “acting to curb excessive volatility in markets as currency losses against the dollar mount.”
Traders entered a wave of sell orders on emerging Asian currencies from the get-go on Wednesday.
The won slid as much as 1.6% to 1,395.55 per dollar, the biggest drop since June, within minutes of the market’s open. The baht plunged as much as 1.3% to 36.739 to the greenback while the Philippine peso, Indonesian rupiah and Malaysian ringgit also declined.
Authorities in the region quickly sought to limit the losses. The yen edged up after Japan’s chief currency official Masato Kanda said the government won’t rule out any options in responding to foreign exchange moves. South Korea’s Vice Finance Minister Bang Ki-sun held an internal meeting and asked officials to closely monitor financial markets.
Read: China Sets Yuan Fix at Strongest Bias on Record to Lift Currency
“There’s not much really of a story out there other than buying dollar until there’s a fundamental change from central banks’ policy stance relative to the Fed,” said Nick Twidale, chief executive Asia Pacific at foreign-exchange broker FP Markets in Sydney. “It’s one-way traffic, it’s the only story in town right now.”
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