Employees of a foreign exchange trading company look at monitors in front of another monitor displaying the Japanese yen’s exchange rate against the US dollar in Tokyo December 27, 2013. — Reuters picKUALA LUMPUR, Dec 27 — Most Asian currencies fell this week as signs of an improving US economy bolstered demand for the dollar amid tapering from the Federal Reserve that’s spurring outflows from emerging markets.
Global funds pulled US$3.3 billion (RM10.8 billion) from South Korean, Thai, Philippine and Indonesian stocks so far in December as the Fed prepares to pare stimulus in January, exchange data show. The Thai baht led declines this week as the two-month-long political protests escalated, raising concerns about economic growth and tourism. Trading was muted due to closures in many markets for the Christmas holidays, according to Malayan Banking Bhd.
“Most Asian currencies weakened because of the broad dollar strength,” said Saktiandi Supaat, head of foreign- exchange research at Malayan Banking in Singapore. “The positive US data also supports the case for further Fed tapering.”
The baht depreciated 0.6 per cent from December 20 to 32.80 per dollar as of 10:14 am in Bangkok, having touched 32.86, the weakest level since June 2010, according to data compiled by Bloomberg. Indonesia’s rupiah fell 0.5 per cent to a five-year low of 12,272.
The Bloomberg US Dollar Index climbed 0.2 per cent during the five days, following last week’s 0.5 per cent increase. The Fed announced December 18 it will trim its monthly bond purchases to US$75 billion from US$85 billion starting next month. Initial jobless claims dropped more than forecast last week to 338,000, while consumer confidence climbed.
Thai unrest
The rupiah is leading the year’s declines among Asian currencies, having fallen 21 per cent as investors anticipated a cut in US stimulus. The Indian rupee slumped 11.5 per cent, the Philippine peso dropped 7.6 per cent and Malaysia’s ringgit 7.2 per cent, according to data compiled by Bloomberg.
“When you look into 2014, the Fed taper has given people an excuse to support the dollar,” said Gundy Cahyadi, a Singapore-based economist at DBS Group Holdings Ltd. “In Asia, some economies such as Thailand and Indonesia are grappling with a lot of political noises.”
The baht fell for a second week and is down 6.7 per cent in 2013, headed for its worst annual performance since 2000. The Election Commission urged the government to delay a February 2 poll after protesters tried to storm a Bangkok arena where candidates were registering, sparking a riot that killed one person and injured 128.
There’s been a series of street demonstrations aimed at toppling Prime Minister Yingluck Shinawatra, who dissolved parliament on December 9. The baht’s drop has been “orderly,” as the market adjusts to the Fed’s stimulus reduction and the political unrest, Bank of Thailand spokeswoman Roong Mallikamas said December 23.
Christmas week
South Korea’s won and the peso bucked the weakening trend. Trading is quiet this week and could remain that way through the New Year as most people are still away on holidays, Malayan Banking’s Supaat said.
The won strengthened 0.6 per cent from December 20 to 1,055.39 per dollar, following a decline of 0.8 per cent last week, data compiled by Bloomberg show. It rallied 1.2 per cent to 10.07 against the yen, rising for a seventh straight week. In 2013, the won climbed 0.8 per cent versus the dollar, trailing a gain of 2.7 per cent in the Chinese yuan, Asia’s best performance.
The South Korean currency’s movements versus the yen have been “relatively fast” and are “problematic,” Vice Finance Minister Choo Kyung Ho said December 19.
Korea intervention
Manufacturers’ business confidence rose to 79 for January, from this month’s 78, according to official data today. The Bank of Korea will manage its policy rate next year to support economic growth and ensure price stability, the central bank said in an e-mailed statement after a board meeting yesterday.
“Exporters may sell dollars as it’s the end of the month and the year,” Sun Sung In, a Seoul-based economist at Shinhan Investment Corp., wrote in a research note today. “The yen has rapidly weakened against the won, and investors are aware of the risk of possible intervention by the authorities.”
Elsewhere in Asia this week, India’s rupee declined 0.2 per cent to 62.1550 per dollar and the ringgit lost 0.2 per cent to 3.2931. While Taiwan’s currency was little changed at NT$29.976 (RM3.30), the peso gained 0.3 per cent to 44.438 and Vietnam’s dong rose 0.1 per cent to 21,090. China’s yuan traded at 6.0694, compared with 6.0713 a week ago. — Bloomberg
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