Asian currencies ended a four-week advance as US economic data fueled speculation the US Federal Reserve would taper its stimulus sooner than economists expected.
The Bloomberg-JPMorgan Asia Dollar Index slumped by the most in more than two months as China’s yuan had its worst five-day drop in more than a year. Malaysia’s ringgit, Thailand’s baht and the Philippine peso fell by the most in a month, and India’s rupee posted a third weekly decline.
The New Taiwan dollar slipped 0.1 percent against the US dollar for the week to NT$29.47, as the central bank intervened to prevent its currency from gaining beyond NT$29.40, the Chinese-language Economic Daily News reported on Friday, citing unnamed traders.
Global funds pulled money out of equities in Indonesia, Thailand and the Philippines and cut buying of Indian stocks. The US Federal Open Market Committee (FOMC) on Wednesday decided to maintain its US$85 billion in monthly bond purchases, and said the world’s largest economy is showing signs of “underlying strength.” US data released on Thursday showed a drop in jobless claims, while a gauge of business activity jumped the most in three decades.
“Speculation on the timing of the FOMC’s tapering has increased after the Fed’s positive tone on the economy,” said Hong Seok-chan, a currency analyst at Daishin Economy Research Institute in Seoul. “Foreign fund flows into equities have slowed.”
The Asia Dollar Index lost 0.4 percent after gaining 1.2 percent in the preceding four weeks. The rupiah slumped 2.8 percent in the five days to 11,334 per US dollar and the yuan, which touched a 20-year high on Oct. 25, retreated 0.25 percent to 6.0995. The rupee weakened 0.4 percent to 61.73 and the ringgit fell 0.4 percent to 3.1707.
South Korea’s won was 0.1 percent stronger for the week at 1,060.80 per US dollar, and has gained 5.8 percent in the past three months. South Korean Finance Minister Hyun Oh-seok said in Seoul on Thursday that the government would take steps to curb “herd behavior” in the currency market.
Elsewhere, Thailand’s baht weakened 0.6 percent to 31.20 per US dollar, halting two weeks of gains. The Philippine peso declined 0.4 percent to 43.215 and Vietnam’s dong was little changed at 21,095 per US dollar.
ECB RATE CUT?
In Europe, the euro slid the most in more than a year versus the US dollar as weaker-than-forecast economic data for the currency region fueled speculation the European Central Bank would cut interest rates as soon as at its meeting next week.
The greenback climbed the most since June against a basket of 10 major peers after the Fed said it sees economic improvement even as it plans to maintain stimulus while it awaits evidence of further gains. A gauge of currency volatility rose for the first week since August.
The euro fell 2.3 percent to US$1.3487 this week in New York, the largest decrease since the five days ended July 6 last year, after reaching an almost two-year high of US$1.3832 on Oct. 25. The shared currency weakened 1 percent to ￥133.08, while the Japanese currency lost 1.3 percent against the US dollar to 98.67.
The Bloomberg US Dollar Index gained 1.5 percent, the most since the week ended June 21, to 1,015.69. It reached 1,016.58 on Friday, the strongest level since Sept. 18.
In London, the pound fell 1.5 percent this week to US$1.5925, the steepest drop since the period ended July 5. Sterling gained 0.8 percent to ￡0.84.69 per euro, the biggest increase since Sept. 27.