Asian currencies fell this week, led by Indonesia’s rupiah and South Korea’s won, amid a global selloff in equities and debt.
About US$2 trillion has been wiped from stocks and bonds worldwide since the start of last week on China’s slowdown, uncertainty over the timing of a US interest-rate increase and the prospect of Greece exiting the euro. The rupiah recorded its biggest five-day drop in two months after Indonesia’s government and the central bank clashed over monetary policy.
“We’ve seen a very sharp escalation of the selloff of bonds in developed markets and that has raised volatility,” Singapore-based BNP Paribas SA head of foreign exchange and interest-rate strategy Mirza Baig said. “The impact we’ve seen for most of Asia is a spillover from the sharp increase in volatility in European bond markets.”
The Bloomberg-JPMorgan Asia Dollar Index dropped 0.2 percent this week as of 5:24pm in Hong Kong. The rupiah weakened 1.2 percent, the won lost 1 percent, India’s rupee declined 0.9 percent and Malaysia’s ringgit fell 0.7 percent. The New Taiwan dollar closed at NT$30.765 against the greenback, from NT$30.752 the previous week.
US Federal Reserve Chair Janet Yellen on Wednesday said that “long-term interest rates are at very low levels” and yields “could see a sharp jump” when the Fed tightens policy.
China’s exports missed estimates to fall for a second month last month and a manufacturing gauge also trailed forecasts.
The rupiah touched a seven-week low on Friday after Indonesian Vice President Jusuf Kalla on Thursday said the central bank would gradually cut borrowing costs, while Bank Indonesia Governor Agus Martowardojo said afterward that he would keep “a tight monetary stance,” to anchor inflation expectations.
“Foreign investors will see a rate cut as an easing signal and that will hit the rupiah,” Jakarta-based PT BNI Securities economist Heru Irvansyah said. “From the domestic side, companies want economic growth to be revived, but we think rates don’t have to be cut to spur high-quality growth once the government implements its work plan.”
The won recorded its first weekly drop in two months as South Korea’s benchmark share index fell for a second week and foreign funds turned net sellers from Thursday.
“Nervous foreign investors sought the safety of the dollar amid turmoil in the stock and bond markets,” Seoul-based Daishin Economy Research Institute currency analyst Hong Seok-chan said.
Thailand’s baht fell 0.9 percent this week, the Philippine peso weakened 0.2 percent and Vietnam’s dong dropped 0.4 percent after the central bank devalued the currency for the second time this year.
The yuan depreciated 0.1 percent.
Additional reporting by staff writer
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