Sun, Jul 20, 2014 - Page 15 News List

Asian currencies decline again on geopolitical risk

Bloomberg

Asian currencies fell for a second week as the prospect of higher US interest rates and worsening conflicts in the Middle East and Ukraine boosted demand for the relative safety of the greenback.

Kiev said pro-Russia rebels shot down a Malaysian Airlines plane on Thursday, killing all 298 people on board, while Israel sent troops into Gaza as a ceasefire with Palestinian militants collapsed. The reports sparked losses in emerging market currencies and stocks, while buoying assets such as US Treasuries.

In addition, US Federal Reserve Chair Janet Yellen on Tuesday said that US borrowing costs could be raised sooner than expected should the job market keep improving.

“People are avoiding emerging market assets following the escalation of geopolitical risk in the Middle East,” said Saktiandi Supaat, head of foreign exchange research at Malayan Banking Bhd. in Singapore. “The plane crash didn’t help sentiment.”

The Bloomberg-JPMorgan Asia Dollar Index fell 0.1 percent this week to 116.09 as of 4:31pm in Hong Kong.

DOLLAR DUEL

South Korea’s won led regional currencies in losses, dropping 1 percent to 1,029.32 per US dollar, data compiled by Bloomberg show, while the New Taiwan dollar posted its biggest weekly decline in almost three months as stock inflows slowed and the plane crash boosting demand for US assets.

Overseas investors bought US$31 million more Taiwanese equities than they sold this week, the smallest purchases since May, exchange data show.

The Taiwanese currency depreciated 0.2 percent this week to NT$30.051 against its US counterpart, prices from Taipei Forex Inc show. That is the unit’s biggest weekly decline since the five days ended on April 25.

“Because of the Malaysian Airline plane crash and geopolitical risks, funds may be leaving emerging markets and returning to the US for refuge,” said Samson Tu (涂韶鈺), a Taipei-based fund manager at Uni-President Assets Management Corp (統一投信). “Foreign funds may also be leaving Taiwan as it doesn’t look like stocks are going to rise any further.”

The benchmark index has fallen 1.8 percent since closing at the highest level since 2007 on Tuesday.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, climbed 0.3 percent this week, the biggest increase since the five-day period ended on May 23.

The prospect of higher rates in the US “also had some impact on emerging market currencies,” said Ho Woei Chen, an economist at United Overseas Bank Ltd in Singapore. “Geopolitical risks are moving to the front at the moment.”

REGIONAL SLIDE

China’s currency received little support from data showing the economy expanded 7.5 percent in the second quarter from a year earlier, more than the 7.4 percent median estimate in a Bloomberg survey. The yuan fell 0.07 percent this week to 6.2080 per US dollar, China Foreign Exchange Trade System prices show.

Elsewhere in Asia, India’s rupee weakened 0.6 percent to 60.2913, Indonesia’s rupiah declined 0.2 percent to 11,618, the baht was steady at 32.151, Vietnam’s dong slipped 0.1 percent to 21,225, and the Philippine peso and Malaysia’s ringgit both gained 0.1 percent to 43.515 and 3.1835 respectively.

The ringgitt fell 0.1 percent to 3.1817 on Thursday after the jet crashed.

YEN COMES DOWN

In Tokyo, the yen weakened as demand for haven assets waned after turmoil in Ukraine and Gaza pushed the Japanese currency to the strongest level versus the euro in five months.

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