Asian currencies halted a three-week rally as signs the world’s biggest economy is slowing tempered demand for emerging-market assets and raised concern about the outlook for exports.
US Federal Reserve Chairman Ben Bernanke said this week the US economic recovery was “frustratingly slow” and offered no hints on a new stimulus program. The Bloomberg-JPMorgan Asia Dollar Index dropped 0.4 percent over the week as overseas investors were net sellers of US$1.6 billion of equities in Thailand, South Korea and Taiwan.
The US dollar rose against the Taiwan dollar on Friday, gaining NT$0.055 to close at the day’s high of NT$28.835 in reflection of sell-offs in the local stock market, dealers said.
The NT dollar lost 0.3 percent against the greenback this week.
The selling of the Taiwan dollar, largely by foreign banks, set the local central bank at ease to some extent and reduced fears that further appreciation of the local currency will continue.
The European Central Bank (ECB) on Thursday kept its main interest rate at 1.25 percent and the euro fell against the US dollar for the third day, extending the first weekly drop in almost a month.
ECB President Jean-Claude Trichet said the bank’s position on inflation was one of “strong vigilance” — usually interpreted to mean future tightening of monetary policy in the eurozone.
While Trichet’s remark was in line with market expectations, the euro came under pressure after the meeting.
“Trichet indicated a rate hike in July, but the ECB was rather tame with its longer-term prospect for inflation,” said Teppei Ino, an analyst at the Bank of Tokyo-Mitsubishi UFJ.
The euro lost 2 percent over the week, falling to US$1.4347 at 5pm on Friday in New York, from US$1.4510 on Thursday.
The yen climbed over the week against all of its most-traded counterparts as investors sought the perceived stability of the currency, but was little changed on Friday at ￥80.32 per US dollar after sliding 0.6 percent on Thursday. It earlier reached ￥79.97, strengthening above ￥80 for a fifth straight day, the longest streak since at least 1971, according to data compiled by Bloomberg.
The US dollar rose against all its major counterparts excluding the yen. The greenback gained 1.5 percent over the week, according to the Bloomberg Correlation-Weighted Indexes. The US dollar is still the worst-performer in the past year, falling 16 percent, according to the index.
The British pound fell for a second-straight week against the US dollar as reports showed factory output contracted. Sterling slid to US$1.6234 from US$1.6426 and was little changed at ￡0.8854 per euro from ￡0.891 pence per euro.