Asian currencies drop as key US budget talks stall

HOPES FADING::As the US failed to make progress on its ‘fiscal cliff’ negotiations, currencies across the region fell against the greenback, with the rupee most affected

Bloomberg and staff writer, with CNA

Sun, Dec 23, 2012 - Page 15

Asian currencies fell this week over concerns that stalled US budget talks will hamper efforts to revive global growth and hurt demand for riskier assets.

The US House of Representative’s Republican leaders on Thursday canceled a planned vote on House Speaker John Boehner’s plan to allow higher tax rates for annual incomes above US$1 million, as US lawmakers seek to avert more than US$600 billion in automatic spending cuts and tax increases next year.

The Indian rupee slid 1.1 percent this week to 55.07 per US dollar in Mumbai, data compiled by Bloomberg show. Indonesia’s rupiah declined 0.2 percent to 9,658 and touched a three-year low of 9,785 earlier in the week, as Malaysia’s ringgit fell 0.2 percent to 3.0637.

The New Taiwan dollar dropped 0.1 percent to NT$29.122 on Friday compared with NT$29.101 on Dec. 14. In a rare Saturday session yesterday, the US dollar fell against the NT dollar, shedding NT$0.002 to close the week at NT$29.120.

The session’s low trading volume reflected the absence of foreign traders and cautious sentiment over a pending “fiscal cliff” in the US that led traders to retreat from the trading floor, dealers said. The central bank intervened to buy into the US dollar and limit the NT dollar’s appreciation to protect the nation’s competitiveness, they said.

Many traders expect the central bank to continue its efforts to rein in the pace of the NT dollar’s appreciation and believe that it wants to keep the US dollar above the NT$29.00 mark, dealers said.

The greenback opened at the day’s high of NT$29.125 and moved to an early low of NT$29.038 before rebounding. Turnover totaled US$171 million during the trading session. The session held to make up for a day that will be lost during the extended New Year’s holiday.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active currencies, excluding the yen, fell from a week ago to 117.92. East Asia’s emerging market economies face risks from Europe and the US, the World Bank said in a report on Wednesday.

The Philippine peso was little changed at 41.075 per US dollar. Bangko Sentral ng Pilipinas will announce measures next week to manage capital inflows, bank Deputy Governor Nestor Espenilla told reporters in Manila on Thursday.

The yuan had the best week in more than two months on optimism that China is recovering from a seven-quarter slowdown. The currency strengthened 0.2 percent this week, the most since the five days ended on Oct. 12, to 6.2286 per US dollar, China Foreign Exchange Trade System figures show.

South Korea’s won and Thailand’s baht were little changed at 1,074.35 per US dollar and 30.62 respectively, while Vietnam’s dong dropped 0.1 percent to 20,848.

The yen fell for a sixth week against the US dollar, the longest streak in nine months, after the Central Bank of Japan said it would review its inflation target after a pro-stimulus government was elected.

Japan’s currency reached a 20-month low versus the greenback after former Japanese prime minister Shinzo Abe’s Liberal Democratic Party of Japan won parliamentary elections, giving him a mandate to pursue expanded monetary easing.

The yen declined 0.9 percent this week to ¥84.24 per US dollar in New York, touching a 20-month low of ¥84.62 on Wednesday. The Japanese currency fell 1.1 percent to ¥111.08 versus the euro, its second weekly decline. It reached ¥112.50 on Wednesday, the least since August last year. The euro rose 0.2 percent to US$1.3188, reaching US$1.3308, the strongest since May.

The Dollar Index erased a weekly decline after Republicans in the US House of Representatives canceled the Boehner vote. The gauge was little changed for the week at 79.538, after reaching its lowest level since Oct. 18.