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Asian Currencies Snap 4-Week Rally on Fed as Rupiah to Yuan Fall - (Bloomberg)

Posted by Chris Advincula on Nov 1, 2013 4:21:00 AM

Asian currencies ended a four-week advance as U.S. economic data fueled speculation the Federal Reserve will taper its stimulus sooner than economists expect.

The Bloomberg-JPMorgan Asia Dollar Index slumped by the most in more than two months as China’s yuan headed for its worst five-day drop this year. Malaysia’s ringgit, Thailand’s baht and the Philippine peso were set for their biggest weekly losses in a month while South Korea’s won declined amid the threat of intervention to curb its recent gains.

Global funds pulled money out of equities in Indonesia, Thailand and the Philippines and cut buying of Indian stocks. The Federal Open Market Comittee maintained its $85 billion in monthly bond purchases on Oct. 30, noting the world’s largest economy is showing signs of “underlying strength.” U.S. data yesterday showed a drop in jobless claims while a gauge of business activity jumped the most in three decades.

“Speculation on the timing of the FOMC’s tapering has increased after the Fed’s positive tone on the economy,” said Hong Seok Chan, a currency analyst at Daishin Economy Research Institute in Seoul. “Foreign fund flows into equities have slowed.”

The Asia Dollar Index lost 0.4 percent from a week ago to 116.51 as of 11:24 a.m. in Singapore. The rupiah slumped 3.1 percent in the five days to 11,371 per dollar and the yuan, which touched a 20-year high on Oct. 25, retreated 0.16 percent to 6.0940. The ringgit fell 0.5 percent to 3.1720.

Tapering Bets

Economists at Citigroup Inc. and Barclays Plc said the Fed’s policy statement opens the possibility of a reduction in bond purchases as soon as December. The odds of tapering in January rose to 45 percent, from 25 percent before the FOMC decision, according to Citigroup. Economists surveyed by Bloomberg Oct. 17-18 had predicted the Fed would begin paring stimulus in March.

Jobless claims decreased by 10,000 to 340,000 in the week ended Oct. 26 from 350,000 in the prior period, the Labor Department reported yesterday in Washington. The median forecast of 49 economists surveyed by Bloomberg called for a decrease to 338,000. The MNI Chicago Report business barometer climbed to 65.9 in October from 55.7 in September.

South Korea’s won fell 0.06 percent for the week to 1,062.75 per dollar, after touching 1,065.45, the weakest since Oct. 17. The government will take steps to curb “herd behavior” in the currency market, Finance Minister Hyun Oh Seok said in Seoul yesterday. The won has strengthened 5.7 percent in the past three months.

Taiwan’s central bank intervened to prevent its currency from gaining beyond NT$29.40 per dollar, the Economic Daily reported today, citing unnamed traders. The Taiwan dollar advanced 0.15 percent for the week to NT$29.411.

Thailand’s baht weakened 0.6 percent to 31.18 per dollar, halting two weeks of gains. The Southeast Asian nation’s lower house passed a bill granting amnesty for political offenses early today, stoking street protests.

Elsewhere, the Philippine peso declined 0.4 percent to 43.215 and India’s rupee dropped for a third week, losing 0.8 percent to 61.9250 per dollar. Vietnam’s dong was little changed at 21,100 per dollar. 


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