Peso Leads Weekly Drop in Asian Currencies on Slowdown Concern
More Americans than forecast filed claims for unemployment benefits, according to data released Sept. 20, while a Chinese manufacturing survey signaled an 11th month of contraction. A gauge of euro-area services and production fell to a 39-month low, another report showed. Bank of Japan (8301) expanded its asset- purchase fund this week by 10 trillion yen ($128 billion), after the Federal Reserve and the European Central Bank announced steps this month that would pump money into financial markets.
“There is concern about the global economic outlook and that’s keeping investors somewhat cautious,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “Still, with quantitative easing by the Fed, there’s optimism about more fund inflows to the region, making the currencies range-bound in recent sessions.”
Malaysia’s ringgit declined 0.6 percent this week to 3.0505 per dollar, according to data compiled by Bloomberg. The Philippine peso also lost 0.6 percent to 41.665, while Indonesia’s rupiah slid 0.5 percent to 9,551. Thailand’s baht fell 0.2 percent to 30.82.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies outside of Japan, was steady at 116.98 compared with 116.93 at the end of last week, while the MSCI Asia Pacific Index of shares lost 0.1 percent.
The ringgit had its first weekly drop this month after the manufacturing report from China, the second-largest buyer of Malaysian goods in July, dimmed the nation’s export outlook. It gained 0.5 percent yesterday.
“In the current circumstances, the Chinese data aren’t too helpful for risk assets,” said Sacha Tihanyi, a Hong Kong-based senior currency strategist at Scotiabank. “The same holds for Europe.”
The rupiah completed its biggest weekly loss this month on speculation importers stepped up dollar purchases after the Fed’s latest asset-buying plan drove the Indonesian currency to a seven-week high.
The U.S. central bank announced on Sept. 13 that it will start purchasing $40 billion of mortgage debt a month to hold borrowing costs down, a policy known as quantitative easing that boosts the supply of dollars. The rupiah touched 9,447 versus the greenback on Sept. 17, the strongest level since Aug. 1, before declining on each of the following four days.
QE Effect Recedes
“The rupiah halted its rally as the QE effect recedes,” said Putu Andi Wijaya, a foreign-exchange dealer at PT Bank Rakyat Indonesia in Jakarta. “Corporates take any opportunity to buy dollars whenever the rupiah reaches a good level.”
The currency lost 5 percent this year, Asia’s biggest decline, amid concern Southeast Asia’s largest economy will have a record current-account deficit this year. The shortfall in the broadest measure of trade widened to an unprecedented $6.9 billion in the second quarter from $3.2 billion in the previous three months.
India’s rupee surged to the highest level in more than four months as the government reduced a tax on local companies’ overseas borrowings, stepping up efforts to revive investment inflows.
India Tax Cut
A tax on interest earned by overseas investors in foreign- currency bonds issued by Indian companies, and on interest payments for overseas loans, was reduced to 5 percent from 20 percent, the Finance Ministry said in a statement in New Delhi yesterday. The cut will be applicable for three years, effective July 1, 2012, according to the statement.
The rupee advanced 1.7 percent to 53.4650 per dollar yesterday in Mumbai, taking this week’s gain to 1.6 percent, according to data compiled by Bloomberg. It touched 53.3388 earlier, the strongest level since May 10.
Elsewhere in Asia, South Korea’s won declined 0.2 percent this week to 1,119.23 per dollar, China’s yuan appreciated 0.15 percent to 6.3053, while Taiwan’s dollar rose 0.1 percent to NT$29.450. Vietnam’s dong traded at 20,870 compared with 20,850 a week ago.