Asian currencies this week declined for a fourth week, led by the Philippine peso and Malaysia’s ringgit, as an improving US economy bolstered speculation that the US Federal Reserve will raise interest rates next year.
An increase in interest rates by the Fed may reduce the attraction of higher-yielding emerging market assets. Currencies in Taiwan, Malaysia and the Philippines all slid to their weakest levels in more than four months versus the greenback.
The Bloomberg-JPMorgan Asia Dollar Index declined 0.3 percent since Sept. 19, contributing to the longest run of weekly losses since May last year.
Equity markets in Taiwan, Indonesia and South Korea saw combined outflows of US$2.1 billion this week.
In Taipei, the New Taiwan dollar depreciated 0.2 percent to NT$30.312 against the US currency this week, falling for a fourth week to post the longest losing streak since January as demand for the greenback climbed amid geopolitical tensions.
“The US dollar is too strong and the Taiwan dollar is following emerging market currencies downward,” said Samson Tu (涂韶鈺), a Taipei-based fund manager at Uni-President Assets Management Corp (統一投信). “Global funds are going back to the US for refuge because of geopolitical risks.”
All but three of the 24 emerging market currencies tracked by Bloomberg fell in the past five days.
The Taiwan dollar bounced back for much of Friday’s session after falling a day earlier on buying by exporters for end-of-month accounting purposes, but gains were capped by foreign institutional selling on Taiwan’s stock market, dealers said.
The weakness of other regional currencies, including the won, also prevented the local currency from rising further, they added.
Late in the session, the central bank intervened to prop the US dollar up and help it return to a level above its previous close, they said.
In Bangkok, the baht dropped 0.4 percent this week, while in Manila, the peso fell for the fourth week in a row, declining 0.6 percent as a report showed the Philippine trade balance unexpectedly swung to a deficit in July.
Imports exceeded exports by US$33 million in July, Philippine government data showed, while the median estimate of economists in a Bloomberg survey was for a US$181 million surplus.
Elsewhere in the region, the ringgit retreated 0.8 percent versus the US currency, Indonesia’s rupiah lost 0.5 percent, the won was little changed and India’s rupee dropped 0.5 percent.
The rupee completed a third weekly loss as global funds pulled about US$415 million from the nation’s stocks and bonds on Tuesday and Wednesday, the latest exchange data show. The currency pared the decline on Friday, rising 0.3 percent after Standard & Poor’s raised India’s sovereign rating outlook to “stable” from “negative.”
S&P also raised the outlook on its South Korea rating to “positive” from “stable” on Sept. 19, supporting the won against the US dollar after three weeks of declines.
Also this week, the yuan rose 0.2 percent, strengthened as a report indicated an unexpected pickup in China’s manufacturing this month. A preliminary reading of the Purchasing Managers’ Index from HSBC Holdings PLC and Markit Economics was 50.5, compared with the 50 median estimate in a Bloomberg survey and last month’s 50.2 figure.
“The general risk sentiment is starting to get a bit shaky,” said Sean Yokota, Singapore-based head of Asian strategy at Skandinaviska Enskilda Banken AB. “The uncertainty related to Fed policy is making investors a bit more cautious.”
Traders see a 75 percent chance the Fed will raise its target for overnight lending between banks by its meeting next September, futures data compiled by Bloomberg showed on Thursday. That is up from 73 percent on Sept. 1.
The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, increased 1.1 percent this week.
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