Rupee Leads Weekly Asian Currencies Drop on U.S. Budget

Asian currencies fell this week, led by India’s rupee and Indonesia’s rupiah, as concern stalled U.S. budget talks will hamper efforts to revive global growth hurt demand for riskier assets.

House Republican leaders canceled a planned vote Dec. 20 on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million, as lawmakers seek to avert more than $600 billion in automatic spending cuts and tax increases. Indonesia’s current-account gap may widen to 2.3 percent of gross domestic product this quarter, the central bank said on Dec. 11. That would be the largest shortfall since Bloomberg began compiling the data in 1997.

“If there’s a postponement for a longer period of time the uncertainties will hit investment sentiment in the U.S. and this will be bad for risk-taking,” said Ho Woei Chen, a Singapore- based economist at United Overseas Bank Ltd. (UOB)

The rupee slid 1.1 percent this week to 55.07 per dollar in Mumbai, according to data compiled by Bloomberg. The rupiah declined 0.2 percent to 9,658 and touched a three-year low of 9,785 earlier. Malaysia’s ringgit fell 0.2 percent to 3.0637, while the Taiwan dollar dropped 0.1 percent to NT$29.122.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, fell from a week ago to 117.92. East Asia’s emerging-market economies face risks from Europe and the U.S., the World Bank said in a Dec. 19 report.

‘Uncertain Deal’

The rupee headed for the worst week in more than a month after the central bank refrained from easing monetary policy to support economic growth at a Dec. 18 review.

The Indian currency is affected by “an uncertain U.S. budgetary deal, which is less than two weeks away from its deadline,” Pramit Brahmbhatt, Mumbai-based chief executive officer at Alpari Financial Services India Ltd., wrote in an e- mail yesterday. “The month-end and quarter-end importer demand for dollars continues to weigh” on the currency, he said.

The rupiah dropped as data from Indonesia’s Finance Ministry showed global funds sold 2.15 trillion rupiah ($223 million) more local-currency government debt that they bought in the three days through Dec. 19, poised for the biggest weekly outflow since August.

“We expect rupiah to remain an underperformer in the region,” said Prakriti Sofat, a regional economist at Barclays Plc in Singapore. “The overall balance-of-payments position remains weak which continues to weigh on the rupiah.”

China Recovery

The peso was little changed at 41.075 per dollar. Bangko Sentral ng Pilipinas will announce measures next week to manage capital inflows, Deputy Governor Nestor Espenilla told reporters in Manila on Dec. 20.

The yuan had the best week in more than two months on optimism China’s economy is recovering from a seven-quarter slowdown. The currency strengthened 0.2 percent this week, the most since the five days ended Oct. 12, to 6.2286 per dollar, according to the China Foreign Exchange Trade System. That took this year’s advance to 1.1 percent.

The People’s Bank of China lowered the reference rate by 0.01 percent to 6.2881 per dollar yesterday. The spot rate is allowed to trade as much as 1 percent on either side of the fixing.

The Chinese currency is close to equilibrium level and has room for small, “sustained” appreciation in the long run, Shanghai Securities News reported yesterday, citing a report from the government-run State Information Center.

The World Bank said in a report this week the world’s second-largest economy will grow 8.4 percent in 2013, faster than an October projection of 8.1 percent. China will increase the movement of the exchange rate “appropriately” to handle the latest round of measures by global central banks to pump money into markets to support growth, the official Xinhua News Agency said in an editorial yesterday.

South Korea’s won and Thailand’s baht were little changed at 1,074.35 per dollar and 30.62, respectively. Vietnam’s dong dropped 0.1 percent to 20,848.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

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

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