Asian Currencies Decline on China Data Before Fed, ECB Meetings

Most Asian currencies dropped before policy decisions by the Federal Reserve and European Central Bank and as Chinese manufacturing data trailed forecasts.

The yuan snapped a four-day advance as the Purchasing Managers’ Index (MXAP) for July released today was 50.1, compared with the 50.5 median estimate in a Bloomberg survey. The Fed will probably forgo announcing a third round of large-scale asset purchases after it concludes a two-day meeting today, according to another Bloomberg survey. The European Central Bank meets tomorrow, after an official report yesterday showed the euro area jobless rate held at a record-high in June.

“The market is fixated on the Fed and ECB meetings,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “The Fed will stop short of guaranteeing a QE3. I think expectations have gotten well ahead of anything the ECB intends to deliver at this meeting.”

Indonesia’s rupiah weakened 0.3 percent to 9,470 per dollar as of 3:05 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. China’s yuan dropped 0.11 percent to 6.3698, Thailand’s baht dropped 0.1 percent to 31.49 and the Philippine peso declined 0.1 percent to 41.762.

The Bloomberg-JPMorgan Asia Dollar Index was little changed, with its 60-day historical volatility at 3.82 percent from 3.83 percent yesterday. The MSCI Asia Pacific Index of stocks declined 0.5 percent, its first drop in a week.

Trade Data

The yuan fell by the most since July 23 even as the People’s Bank of China strengthened the currency’s daily fixing by 0.02 percent to 6.3305 per dollar.

“The latest PMI tells us China’s economy isn’t doing that great,” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen. “The yuan is weaker as the dimmer growth outlook has spurred demand for the dollar.”

The rupiah dropped as a government report today showed exports slumped 16.4 percent in June from a year earlier. Economists predicted a 7.9 percent contraction in a Bloomberg survey. Trade deficit widened to $1.3 billion, compared with a shortfall of $486 million in May.

“Falling exports and rising imports will increase our dependence on foreign currencies, which will weigh on the rupiah,” said Artanavaro Gasali, the head of global markets at PT Bank ICBC Indonesia in Jakarta.

Elsewhere, South Korea’s won gained 0.4 percent to 1,126.60 per dollar, according to data compiled by Bloomberg. Taiwan’s dollar strengthened 0.1 percent to NT$29.988 and India’s rupee climbed 0.3 percent to 55.505. Malaysia’s ringgit was steady at 3.1145 and Vietnam’s dong was little changed at 20,865.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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