Asia moves to prop up currencies as chip selloff deepens

The Taiwan dollar and South Korean won fell the most among Asian currencies on Thursday, October 15, as a slump in Wall Street semiconductor shares spread into regional markets and cut demand for companies in the artificial intelligence supply chain, Bloomberg reported. The selling also reached Southeast Asia. The Philippine peso hit a record low, and Indonesia's central bank stepped in to support the rupiah.theedgemalaysia.com

The moves show how closely the export-reliant economies of North Asia track global technology sentiment. A US gauge of chip stocks lost $1.6 trillion in market value during a six-day losing streak, driven by concerns over high interest rates, rich valuations and heavy AI spending, according to Bloomberg's report carried by The Edge Malaysia.brecorder.com

Outflows and intervention in Taipei

Traders told Bloomberg the Taiwan dollar's early slide came mainly from foreign capital outflows and exporters holding on to US dollars. State-owned banks sold dollars to provide liquidity, according to the traders, who asked not to be named. Foreign investors sold NT$165.3 billion of Taiwanese stocks on Tuesday, the third-largest one-day outflow in data going back to 2000. The selling continued for a sixth straight session on Wednesday.theedgemalaysia.com

The currency fell to its weakest level since early August, according to Reuters via Business Recorder. Taiwan's central bank data show USD/TWD closed at 32.265 in interbank trading. The Taiex ended 3.4% lower. TSMC Taiwan Semiconductor Manufacturing Company Limited ↘ 2.28% fell 2% even after it forecast strong fourth-quarter growth. US September consumer price data, which came in hotter than expected, raised expectations of a Federal Reserve rate hike and deepened the selloff.brecorder.com+3

Seoul's circuit breaker

The won dropped more than 1% to a two-week low. The Kospi tumbled over 8%, setting off a circuit breaker for the first time in two and a half months. Samsung Electronics and SK Hynix ↘ 6.58% posted their worst day since late July. Foreign funds sold $1.8 billion of Korean stocks on Thursday morning alone, pushing October outflows past $10 billion.brecorder.com+1

"The Korean won and Taiwan dollar, both proxies for the global tech cycle, have come under pressure," said Christopher Wong, a strategist at OCBC Oversea-Chinese Banking Corporation Limited.

Spillover to Southeast Asia

The peso weakened past 63 per dollar for the first time. The Reserve Bank of India sold dollars to support the rupee. Goldman Sachs ↘ 1.12% analysts said they "expect further peso weakness." They pointed to a large current account deficit and weaker portfolio and direct investment inflows.theedgemalaysia.com+1

Philip McNicholas, Asia sovereign strategist at Robeco, said currencies exposed to tech, along with those sensitive to risk sentiment "like the rupiah and peso," were "impacted the most."