Asian currencies mired in losing streak
SINGAPORE — Asian currencies dropped for a third week, the longest run of losses since January, as the prospect of higher US interest rates dimmed the appeal of emerging-market assets.
Indonesia’s rupiah and Malaysia’s ringgit led the declines after the Federal Reserve on Sept 17 raised by 25 basis points its median estimate for where the federal funds rate will be by the end of 2015, while pledging to keep it near zero for a “considerable time.” Global funds pulled a combined $1 billion from stocks in Indonesia, South Korea, Taiwan, India and the Philippines this week. Scotland voted to stay in the UK in a referendum on independence.
“The key concern is capital outflows from Asia to the US,” Ho Woei Chen, an economist at United Overseas Bank Ltd in Singapore, said on Friday. “The US could raise interest rates at a faster pace than expected.”
The Bloomberg-JPMorgan Asia Dollar Index, which tracks 10 regional currencies excluding the yen against the greenback, fell 0.2% this week to 115.78. The rupiah dropped 1.3% from Sept 12 to 11,968 per dollar in Jakarta and the ringgit weakened 1.1% to 3.2340. The Philippine peso declined 1.2% to 44.43 on Sept 18, before the country’s financial markets were shut yesterday due to rain and flooding.
Malaysia would be vulnerable to outflows from emerging markets as overseas investors held 32% of government debt as of July, compared with 17% in Thailand, according to central bank data.
Bank Negara Malaysia left its key rate at 3.25% on Sept 18, after raising it for the first time in more than three years in July. The decision was predicted by 11 of 21 economists surveyed by Bloomberg, with 10 forecasting a 25 basis-point increase.
“The Fed signalled a higher-rate path, whereas Bank Negara stood pat,” Choong Yin Pheng, senior manager for bonds and economic research at Hong Leong Bank Bhd in Kuala Lumpur, said on Friday. “That’s driving down the ringgit.”
South Korea’s won fell 0.9% this week in the longest run of losses since May 2013, and dropped 0.2% on Friday to 1,044.70 per dollar in Seoul, data compiled by Bloomberg show. It fell as much as 0.5% to 1,047.85, the weakest level since April.
The won pared losses after Scotland voted to remain in the UK in an independence referendum, said Park Daebong, a Seoul-based currency trader at Nonghyup Bank. Some 55% of Scottish voters supported the “no” campaign compared with 45% who backed independence.
In Shanghai, the yuan fell 0.1% this week to 6.1415 per dollar, China Foreign Exchange Trade System prices show. The People’s Bank of China started providing 500 billion yuan ($81 billion) of funds to the nation’s five largest lenders this week, a government official familiar with the matter said.
Elsewhere in Asia, Taiwan’s dollar depreciated 0.6% from Sept 12 to T$30.258 against its US counterpart, and India’s rupee fell 0.3% to 60.8275. Thailand’s baht gained 0.1% to 32.20, while Vietnam’s dong was little changed at 21,205.