India’s rupee led the worst weekly loss for Asian currencies in more than a month as improving US data added to speculation that the US Federal Reserve will pare the monetary stimulus that has fueled demand for emerging market assets.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, fell 0.6 percent to ￥115.32 on Friday in Singapore, the biggest five-day decline since June 21.
The New Taiwan dollar slid 0.6 percent to NT$30.129 on Friday compared with NT$29.950 on June 26, as the central bank once again worked to reverse the US currency’s early losses by the end of the session, dealers said.
The central bank intervened in the late trading session on Friday, as it has done repeatedly over recent days, pushing the greenback back to about NT$30, a level the bank is believed to be holding to drive down the prices of locally produced goods for the global market, they said.
Elsewhere in Asia, the rupee fell 3.1 percent to 60.9575 per US dollar, Malaysia’s ringgit slid 1.5 percent to 3.2578 and South Korea’s won dropped 1.1 percent to 1,123.79.
Thailand’s baht weakened 0.8 percent to 31.40 per US dollar, the Philippine peso dropped 0.7 percent to 43.61, Indonesia’s rupiah fell 0.2 percent to 10,285 and China’s yuan traded at 6.1294, compared with 6.1316 at the end of last week.
The rupee halted a three-week advance after the Reserve Bank of India (RBI) held its benchmark interest rate at 7.25 percent on Tuesday, and said measures to shore up the currency by creating a cash squeeze will be reversed once the exchange rate stabilizes.
Earlier last month, RBI Governor Duvvuri Subbarao boosted two interest rates, curbed funding support for banks and raised lenders’ daily reserve requirements to buoy the rupee, which touched a record low of 61.2125 on July 8.
“The RBI statement suggested a policy dilemma,” Mizuho Bank Ltd economist Vishnu Varathan said. “They are constrained because of low growth. They would rather ease policy, but needed to tighten liquidity because of the weak rupee.”
The ringgit fell to a three-year low of 3.2590 per US dollar on Friday after Fitch Ratings cut Malaysia’s credit outlook on Tuesday to “negative,” fueling concerns that global funds will accelerate asset sales.
Fitch cited rising debt levels for the move and said the country’s public finances are its “key rating weakness,” spurring a 1.4 percent drop in the benchmark stock index this week, the worst since March.
“People are pricing in a tapering from the Fed. The reason the ringgit will be most vulnerable is the possibility of further outflows from the bond market,” said Hamish Pepper, a currency strategist at Barclays PLC in Singapore.
The won fell for a fourth day on Friday, the longest losing streak since March. South Korea’s growth momentum is “weak,” South Korean Minister of Finance Hyun Oh-seok said on Thursday as data showed the country’s trade surplus narrowed and industrial production fell.
South Korea’s trade surplus decreased to US$2.7 billion last month, compared with a revised US$6 billion in June, according to government figures released on Thursday. Industrial production contracted 2.6 percent in June from a year earlier, Statistics Korea said on Tuesday.
“South Korea’s economic data didn’t meet expectations, which is worrisome,” said Kim Do-hee, a currency trader at Australia & New Zealand Banking Group Ltd. “But investors are more concerned about the Fed’s exit strategy.”
The US dollar rallied this week as a weaker-than-forecast unemployment report and the Fed pledge to keep buying bonds failed to erase speculation that policymakers will wind down the program this year.
The Bloomberg US Dollar Index snapped three weeks of declines even as the Fed said persistently low inflation could hamper the US’ economic expansion. The US Census Bureau may report on Tuesday that the trade deficit shrank in June.
The euro fell from a six-week high as the European Central Bank said interest rates may stay low for an extended period.
The Bloomberg US Dollar Index, which tracks the greenback against 10 other major currencies, gained 0.6 percent to 1,028.74 this week in New York, and touched the highest level since July 19.
The US dollar “holds its own until there’s more synchronized growth around the world,” Kathleen Gaffney, a portfolio manager Eaton Vance Corp said by telephone.
“We are going through a bit of an adjustment where the US continues to move forward, Europe has stabilized, Japan’s in question,” she said. “Between the three, the dollar wins out.
The US tender gained against all but two of its 16 most-traded peers on the week. It gained less than 0.1 percent to US$1.3276 per euro and rose 0.7 percent to ￥98.94 against the yen. Japan’s currency dropped 0.7 percent to ￥131.34 per euro.
The Aussie had the biggest decline among the US dollar’s major peers, falling to US$0.8916, as the Australian government predicted the budget deficit for the year ending on June 30 next year will be A$30.1 billion (US$26.8 billion), compared with its previous forecast of an A$18 billion shortfall.
The British pound fell 0.7 percent to US$1.5273 this week.
The UK currency depreciated 0.7 percent to ￡8690 per euro after depreciating to ￡0.8770 on Thursday, the weakest level recorded since March 12.