Led by the Indian rupee’s slide to a 13-month low, Asian currencies retreated this week, as Russia’s financial crisis and a collapse in oil prices prompted investors to favor safer bets than emerging market assets.
The ruble plunged to a record low as Brent crude sank to a five-year low, sparking concern that the rout would spread across the developing world. Global funds pulled more than US$3 billion from stock markets in Taiwan, South Korea and India this week, the latest exchange data show.
In Taipei, the New Taiwan dollar lost 0.5 percent this week, with the greenback rising to NT$31.472 against the local unit on Friday, as traders reacted to the weakness of the yen, dealers said.
Dealers said there have been fears that a falling yen will intensify currency depreciation competition in the region, which prompted traders to lower their NT dollar holdings.
Buying in the US currency also reflected a move by the People’s Bank of China to lower the yuan rate by about 0.02 percent against the greenback, but this was somewhat offset by a technical rebound on the TAIEX exchange that lent support to the NT dollar, they said.
Turnover totaled US$813 million during the trading session.
The Taiwanese unit did get some support from foreign institutional buying in the stock market, boosting demand for the local currency, dealers said.
Meanwhile, Indonesia’s central bank intervened to support the rupiah, which had its lowest close in 16 years, and traders said India’s did likewise for the rupee.
The retreat in Asian currencies “could be related to the Russian ruble falling off and leading to emerging markets risk-off and some contagion effect,” said Sean Yokota, Singapore-based head of Asian strategy at Skandinaviska Enskilda Banken AB. “Risk appetite is declining as oil prices are moving lower.”
The rupee fell 1.3 percent against the US dollar this week as of 2:43pm on Friday in Mumbai, data compiled by Bloomberg show. The yuan dropped 0.5 percent, moving to within 0.4 percent of the lower end of its permitted trading band, while the Philippine peso and the rupiah declined 0.3 percent.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-used currencies excluding the yen, lost 0.5 percent.
The Bloomberg Dollar Spot Index, which tracks the US currency against 10 peers, advanced 0.6 percent this week and is headed for a sixth monthly gain.
In Shanghai, the yuan fell to a six-month low of 6.2316 per US dollar on Friday after data this week fueled concern that the world’s second-largest economy is losing momentum. A preliminary gauge of factory output pointed to the first contraction in seven months, after reports this month showed export growth and inflation trailing estimates and imports falling.
“The yuan is getting a double hit from worse-than-expected domestic economic data and a stronger dollar,” said Daniel Chan, an analyst at Brilliant & Bright Investment Consultancy Ltd. “The yuan will stay weak as the market now expects the Fed is getting ready to raise interest rates and there are no signals indicating China is heading for any strong recovery.”
Elsewhere in Asia, the Malaysian ringgit advanced 0.6 percent from Friday last week, ending a nine-week losing streak in which the currency tumbled 6.7 percent, while South Korea’s won strengthened 0.1 percent and Thailand’s baht fell by the same amount.
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