Asian currencies stumble on Fed fears, slow China

Bloomberg and staff writer, with CNA

Sun, Jul 07, 2013 - Page 15

Asian currencies fell, led by India’s rupee, as speculation the US Federal Reserve will taper stimulus and signs that Chinese growth is slowing dampened demand for emerging market assets.

Two manufacturing gauges in Asia’s largest economy fell last month, reports showed this week, while data indicating an improvement in the US labor market bolstered the case for the Fed to begin paring debt purchases that have spurred fund flows to Asia.

Overseas investors pulled US$1.1 billion from Taiwanese, South Korean and Indonesian stocks this week, exchange data show. The Bloomberg US Dollar Index, which tracks the greenback against 10 major currencies, climbed 1 percent since June 28.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active currencies, declined 0.2 percent for the week to 115.52, according to data compiled by Bloomberg.

In Taipei, the New Taiwan dollar declined 0.3 percent to NT$30.218 on Friday, down from the NT$30.120 posted on June 28.

The US dollar rose against the NT dollar on Friday, gaining NT$0.019 after the central bank intervened to help the greenback recoup earlier losses, dealers said.

Before the central bank entered the market, the US dollar faced downward pressure as the TAIEX staged a strong technical rebound on the back of foreign institutional buying, creating demand for the local currency, they added.

The greenback opened at NT$30.210, and moved between NT$30.010 and NT$30.218 before the close. In the short term, the central bank is expected to continue to intervene to keep the greenback above the NT$30 mark and protect exports, the dealers said.

Elsewhere in Asia, the rupee fell 1.4 percent to 60.2400 per US dollar, in its ninth straight weekly loss. Thailand’s baht weakened 0.2 percent to 31.11 per US dollar, Indonesia’s rupiah fell 0.2 percent to 9,943 and Vietnam’s dong shed 0.2 percent to 21,238.

South Korea’s won was little changed at 1,142.50, while China’s yuan rose 0.1 percent to 6.132, Malaysia’s ringgit retreated 0.9 percent to 3.1875 and the Philippine peso weakened 0.5 percent to 43.405.

The rupee had its longest weekly losing streak in a year after foreign funds cut holdings of local-currency Indian debt by US$562 million in the first three days of the week, following withdrawals of US$5.4 billion last month, exchange data show.

Goldman Sachs Group Inc cut its rupee forecast, saying India may find it tough to lure capital to offset its record current account deficit.Goldman sees the rupee at 60 per US dollar in 12 months, compared with an earlier prediction of 56. It will depreciate to 62 by end of next year, the lender forecast.

Malaysia’s stock exchange released figures this week showing foreign funds sold a net 3.5 billion ringgit (US$1.1 billion) of local shares last month.

Meanwhile, the US dollar rallied to its strongest level in almost three years as data signaled the world’s biggest economy is improving, increasing speculation the Fed will begin slowing its unprecedented monetary stimulus.

The US currency climbed versus all of its 16 most-traded peers this week as US employers added more jobs last month than forecast, unemployment benefits claims fell and a gauge of manufacturing beat projections.

The euro and pound dropped against the US dollar after the European Central Bank (ECB) and the Bank of England said they would keep rates at record lows. The Fed is to release the minutes of its last meeting next week.

The Dollar Index, which IntercontinentalExchange Inc uses to track the greenback versus currencies of six major US trade partners, increased 1.6 percent to 84.449 this week in New York. The gauge touched 84.530 on Friday, the strongest level since July 13, 2010, as it extended a third weekly gain, the longest stretch since March 8.

The greenback climbed 1.4 percent to US$1.2829 per euro and reached US$1.2806, its strongest level since May 17. The US currency also advanced for a third week against the yen, strengthening 2.1 percent to ¥101.20. The euro appreciated 0.7 percent to ¥129.82.

Europe’s 17-nation currency slid versus the dollar after ECB President Mario Draghi made an unprecedented pledge to keep interest rates low for an extended period.

Sterling slid versus all except two major peers, dropping the most since February against the US dollar on bets that the Bank of England is ready to do more to aid the UK recovery.

The pound ended the week down 2.1 percent at US$1.4890 and slid to a two-month low against the euro. Britain’s currency depreciated 0.6 percent to £0.8607 per euro.