Asian currencies tumbled the most in 21 months this week as US Federal Reserve Chairman Ben Bernanke said the central bank would probably taper stimulus that has driven fund flows to emerging markets.
India’s rupee touched a record low and Malaysia’s ringgit had its worst week in three years after Bernanke said on Wednesday that US$85 billion a month of debt purchases, also known as quantitative easing, may be trimmed this year and end next year if the US economy performs in line with Fed estimates.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies, dropped 1.1 percent since June 14 to 115.51 in Hong Kong, the biggest decline since Sept. 23, 2011.
The New Taiwan dollar weakened 1 percent to NT$30.280 per US dollar. The rupee retreated 2.9 percent to 59.2675 against the greenback, the ringgit fell 2.7 percent to 3.2 and the Philippine peso lost 2.1 percent to 43.735.
“The prospect of less quantitative easing has caused outflows and a selloff in Asian assets,” said Tobby Lin, a fixed-income trader at Yuanta Securities Co (元大證券) in Taipei. “The countries that had experienced the most inflows, like South Korea and Southeast Asian nations, are being hit the most.”
Global investors pulled a combined US$2.1 billion from Taiwanese, South Korean, Thai and Indonesian stocks in the first four days of this week, exchange data show.
More than US$19 billion was withdrawn from funds investing in developing-nation assets in the three weeks to June 12, the most since 2011, according to data from EPFR Global. The Dollar Index, which tracks the greenback against six major counterparts, rose 1.6 percent for the week, while the MSCI Asia Pacific Index of shares fell 2.5 percent.
Losses in regional currencies have forced central banks to defend their exchange rates. The Bank of Thailand will step in to curb excessive volatility in the baht if needed, Deputy Governor Pongpen Ruengvirayudh said on Thursday in Bangkok. Finance Minister Kittiratt Na-Ranong said on the same day he wanted the Bank of Thailand to “manage the foreign-exchange rate.”
Policymakers are watching the rupee and “will take steps if necessary,” Reserve Bank of India Deputy Governor H.R. Khan said on Friday.
The central bank probably sold dollars around the unprecedented 59.98 level to prevent the rupee from sliding past 60, three traders said on Thursday, asking not to be named as the information is not public.
In Taiwan, the central bank’s intervention escalated as it tried to prop up the greenback in a bid to make Taiwan-made goods cheaper in the global market, dealers said.
The greenback opened at NT$30.220 on Friday and moved to an early low of NT$29.860 before rebounding to close at NT$30.280.
Elsewhere in Asia, South Korea’s won dropped 2.4 percent this week to 1,154.15 per US dollar. Thailand’s baht fell 1.6 percent to 31.07, Indonesia’s rupiah declined 0.6 percent to 9,930, China’s yuan was down 0.06 percent at 6.1342 and the Vietnamese dong slipped 0.2 percent to 21,036.
The Fed’s signal of a policy shift also lifted the US dollar to its highest against the yen since December 2009. The greenback rose 3.8 percent to ￥97.90 this week in New York, the most since the five days ended Dec. 4, 2009. The US currency added 1.7 percent to US$1.3122 per euro, touching the strongest level since June 6. The yen lost 2.3 percent to 128.45 per euro.
The Dollar Index, which Intercontinental Exchange Inc uses to monitor the greenback against the currencies of six US trade partners, increased 2.2 percent to 82.410. It rose 1 percent on Wednesday when the Federal Open Market Committee left the monthly pace of bond purchases at US$85 billion, saying “downside risks to the outlook for the economy and the labor market” have diminished.
The gauge may climb to 85.7 by the end of the year, according to the median forecast of economists and strategists surveyed by The British pound also slumped 2.1 percent this week to US$1.5379 and depreciated 0.1 percent to ￡0.8531 per euro.