The onshore Chinese yuan held steady above Wednesday's 8-1/2 year low. The offshore yuan, however, touched a low of 6.9872 on Thursday, the weakest since the yuan started trading overseas in late 2010. Helping to lend some support to Asian currencies, the US 10-year Treasury yield touched a 2-week low of 2.486 percent on Thursday. Investors are now awaiting specifics on the economic policies of US president-elect Donald Trump, who takes office on January 20.
"Our best guess is that until clarity emerges on Trump's policy plans and political capital to push these through it will be a volatile time for headline-driven markets," Vishnu Varathan, senior economist for Mizuho Bank, said in a research note. Emerging Asian currencies have declined broadly since early November as the dollar and US bond yields jumped on expectations that Trump's proposals for infrastructure spending and tax cuts will boost economic growth and inflation.
Worries about Trump's stance on trade have also weighed on the currencies of export-dependent countries in Asia. The onshore Chinese yuan held steady against the dollar on Thursday, as dollar liquidity offered by major state-owned banks countered demand by bank clients for the greenback. The yuan last stood at 6.9550 per dollar, having pulled up from Wednesday's low of 6.9666, which was the yuan's lowest level since May 2008.
A South Korean government official in charge of foreign exchange markets cautioned traders against pushing the won too low, highlighting the government's concerns about any excessive fall in a thinned out currency market ahead of the New Year. "While we don't target any specific levels of foreign exchange rate, our assessment is that market should be cautioned about the current levels," a foreign exchange official at the Finance Ministry told Reuters over the phone. The official's comments came after Finance Minister Yoo Il-ho said earlier on Thursday that the won's depreciation against the dollar was not too fast.