SINGAPORE, July 28 — The Singapore dollar rose on Tuesday as volatile Chinese stocks boosted appetite for safer assets and most emerging Asian currencies gained on the US dollar’s overnight weakness.

South Korea’s won outperformed regional peers on month-end corporate demand, reversing earlier losses.

There were doubts over how long emerging Asian currencies could hold up, given the mounting concern over China’s share markets after they suffered their largest drop in eight years on Monday.

In the previous session, the yuan in the offshore market tumbled, while onshore spot barely moved as the central bank was seen intervening to support it, traders said.

Chinese stocks extended their losses by midday on Tuesday as Beijing scrambled to stabilise them. The wild gyrations have boosted fears over the financial stability of the world’s second-largest economy.

Such worries came as the Fed is expected to raise interest rates as soon as September. The US central bank starts its two-day policy meeting later in the day and investors are awaiting any clues on the timing of a rate hike.

“Most USD/AXJ are expected to remain supported amid the Fed tightening bias and weak commodity prices,” said Christopher Wong, a senior currency analyst at Maybank in Singapore, referring to Asia ex-Japan currencies.

Chinese stocks also slumped, triggering regional equity sell-down and risk-off sentiment,” Wong said. “That will result in safe-haven flows. Typical safe-haven flows in the yen  and the Singapore dollar will take hold.”

Reflecting the downbeat sentiment, commodity currencies like the Malaysian ringgit and the Indonesian rupiah did not benefit from the dollar’s retreat.

The ringgit stayed around a 17-year low despite Standard & Poor’s affirmation of its sovereign rating, indicating sentiment remains fragile amid global risk aversion and political tensions. Local media reported that Prime Minister Datuk Seri Najib Razak, fighting a graft scandal, has dumped his deputy and four others in a cabinet reshuffle.

Thailand’s baht turned weaker after disappointing June factory output data and as the finance ministry slashed its economic growth forecast for this year.

Singapore dollar

The Singapore dollar gained versus the greenback as the currency hit 0.9915 per the Australian dollar, its strongest since March 2009.

The city-state’s unit turned weaker versus the Australian dollar for the day, but it stayed firmer than parity. 

Demand against the neighbouring ringgit also supported the Singapore dollar.

Won

The won started the day weaker and fell to the session low of 1,170.6 per dollar on concerns over a rout in China’s stocks.

The South Korean currency then steadied as local exporters bought it for month-end settlements.

Offshore funds also purchased the won at around 1,170 as the recent decline was viewed as excessive, some analysts said.

The won has lost 4 per cent against the dollar so far this month, putting it on course for its biggest monthly depreciation since May 2012, Thomson Reuters data showed.

Ringgit

S&P kept Malaysia’s long-term foreign currency sovereign credit rating at A- with a “stable” outlook, saying allegations of graft involving debt-laden state fund 1MDB will not impede policymaking.

The ringgit failed to benefit from the rating affirmation. It was quoted at 3.8130 per dollar, just a tad stronger than yesterday’s low of 3.8176, its weakest since September 1998. The currency was pegged at 3.8000 from 1998 to 2005.

Most government bond prices fell today.

The Malaysian Insider news portal earlier reported that Deputy Prime Minister Tan Sri Muhyuddin Yassin would be among those sacked from the cabinet, a day after Najib told Muhyiddin and others to avoid commenting on the scandal at 1MDB. — Reuters