Asian currencies retreated this week, led by the baht and ringgit, after the US Federal Reserve’s announcement that it will pare stimulus fueled demand for emerging market assets.
The Fed on Wednesday will trim its monthly bond-buying to US$75 billion from US$85 billion next month, while pledging to keep interest rates close to zero.
Global funds pulled US$259 million from Thai, Philippine and Vietnamese stocks in the first four days of the week, exchange data show.
The Bloomberg US Dollar Index climbed 0.8 percent from Dec. 13, poised for its biggest weekly gain since the period ended on Nov. 1.
“Asian currencies’ weakness has largely been driven by the Fed’s tapering announcement,” said Nick Verdi, a foreign exchange strategist at Barclays PLC in Singapore.
The baht depreciated 1.7 percent this week to 32.600 per US dollar in Bangkok, its worst five-day performance since August, data compiled by Bloomberg show.
The ringgit slumped 1.6 percent to 3.2880, its ninth straight weekly decline and longest losing streak since November 2005.
In Taipei, the New Taiwan dollar posted its biggest weekly loss since June 21. The currency depreciated 1 percent this week to NT$29.980 against the greenback, compared with NT$29.689 on Dec. 13.
The currency lost 0.1 percent on Friday, after slipping 0.2 percent in the last 11 minutes of trading amid suspected central bank intervention. The monetary authority has sold the NT dollar in the run-up to the close on most days since March last year, according to traders who asked not to be identified.
Elsewhere in Asia, Indonesia’s rupiah fell 0.8 percent to 12,213 after touching a five-year low of 12,255 earlier in the week, South Korea’s won fell 0.8 percent to 1,061.20, the Philippine peso dropped 0.7 percent to 44.495, India’s rupee advanced 0.1 percent to 62.04, while China’s yuan and Vietnam’s dong were little changed at 6.0713 and 21,100 respectively.
Asian policymakers braced for market reactions after the taper announcement. Seoul will act preemptively if needed to counter any currency volatility, South Korean Vice Minister of Finance Choo Kyung-ho said by telephone on Thursday, while Bangko Sentral ng Pilipinas said it will watch for any need to tailor policy.
Kuala Lumpur is strengthening its fiscal policy to handle the impact of tapering, Malaysian Second Minister of Finance Ahmad Husni Hanadzlah told reporters on Thursday.
Capital is expected to flow out of Thailand because of the reduction in stimulus, Arkhom Termpittayapaisith, secretary-general of the Thai National Economic & Social Development Board, said in national television broadcast.
The baht touched a three-year low of 32.650 per US dollar on Friday, before anti-government protesters rallied on the streets of Bangkok to attract support ahead of a demonstration planned for today.
Meanwhile, the greenback against the yen for an eighth week — its longest streak since February — and gained versus 14 of its 16 major peers after the Fed’s taper announcement.
The US dollar climbed 0.9 percent to ￥104.10 in New York after reaching ￥104.64 earlier in the week, the highest level since October 2008. It was the longest period of five-day gains since Feb. 1.
The euro fell 0.5 percent to US$1.3673, the first drop in six week, while the Japanese currency fell 0.3 percent to ￥142.32 per euro.
The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, rose 0.5 percent to 1,021.34 this week. It is up 3.5 percent this year.
In London, the pound rallied on speculation that the Bank of England will need to raise interest rates sooner than planned. Sterling climbed 0.3 percent to US$1.6350 this week and reached US$1.6484 on Wednesday, its highest level since August 2011.
The British currency strengthened the most in six weeks against the euro as a report showing the UK’s unemployment rate unexpectedly fell to the lowest in 4.5 years added to signs that the economic expansion is gathering pace.
Of the 10 developed nation currencies tracked by Bloomberg Correlation-Weighted Indexes, the US dollar has appreciated 4.1 percent this year, the euro has risen 8.3 percent and the yen has posted the largest decline by shedding 15 percent.
Additional reporting by staff writer, with CNA
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