Asian currencies have been battered lately by talk of the U.S. Federal tapering its massive stimulus program and analysts expect the pummeling to continue as other major drivers that led the currencies to appreciate now face pressure.
On top of funds flowing out of Asia on worries about the Fed unwinding its asset-purchase program, Citi Research expects sovereign risk re-assessment, weakness in the Japanese yen, and deteriorating current-account deficits to weaken regional currencies further in the months ahead.
"We think there is more weakness to come for most currencies as some of the major drivers of Asia FX (forex) appreciation since the global financial crisis are less supportive," Johanna Chua, chief Asia economist at Citi said in a report.
Emerging Asian currencies gained in appeal after the global financial crisis (GFC) in 2008 because their countries had favorable financial positions that led to credit ratings upgrades. That stood out in contrast to ratings downgrades in Europe, Japan and the U.S.
But that positive sovereign risk backdrop in Asia has now run its course, according to Citi.
"Many of the big rating upgrade stories in Asia have already happened…while the worries about the financial imbalances from the post-GFC credit-fueled investment boom in China are now weighing on sovereign risk assessments," Chua said.
Concerns about a liquidity crunch in China are growing after an unsuccessful bond auction last week and a spike in interbank lending rates.
(Read More: How China Could Douse Optimism From the Fed)
"Meanwhile, tail risks that would have been very damaging to some advanced economies, for example a "Grexit" or U.S. "fiscal cliff" have abated," she said, referring to concerns about a Greek exit from the euro zone and U.S. fiscal woes.