Asian Currencies Drop as Yen Weakness Spurs Intervention Concern

Asian currencies declined for a second week on speculation regional central banks will allow their exchange-rates to depreciate to keep exports competitive with Japan, as the yen fell to a four-year low.

South Korea’s won and the Taiwan dollar are more sensitive to yen weakness because companies such as Samsung Electronics Co. and Sony Corp. compete for global market share. Those exchange rates, along with Malaysia’s ringgit, led this week’s drop. Asian currencies also fell amid rising demand for the dollar, after U.S. retail sales beat economists’ forecasts.

“Policy makers in countries competing with Japan remain sensitive about the yen’s move and there are some intervention concerns in these markets,” said Koji Fukaya, chief executive officer and foreign-exchange strategist at FPG Securities Co. in Tokyo. “There’s also general dollar strength on the back of optimism over the U.S. economic recovery.”

The Bloomberg-JPMorgan Asia Dollar Index (DXY), which tracks the 10 most-active currencies excluding the yen, declined 0.3 percent from a week ago to 117.64 as of 11:51 a.m. in Hong Kong. The won dropped 0.9 percent to 1,116.60, the ringgit weakened 0.9 percent to 3.0203 and the Taiwan dollar slipped 0.6 percent to NT$29.978. South Korea’s markets are shut today for a holiday.

Follow Trend

The won touched a three-week low of 1,118.96 per dollar yesterday after the Financial Services Commission said in an e-mailed statement that it will monitor market risks, including the weak yen, and take preemptive measures if needed.

Finance Minister Hyun Oh Seok said companies should strengthen their competitiveness because the yen is likely to stay low for “quite some time,” according to a Yonhap News report this week.

Japan’s currency reached 102.76 per dollar on May 15, the lowest level since October 2008. It traded at 102.34 in Tokyo today and has lost 15.9 percent this year, the most in Asia.

“The yen will probably weaken” further this year, said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “Currencies like the Taiwan dollar and the won will follow the trend.”

The Dollar Index, which tracks the greenback against the currencies of six major trading partners, rose 0.9 percent this week and reached its highest level since July on May 15. Federal Reserve Bank of San Francisco President John Williams said yesterday the central bank may cut its $85 billion monthly bond-buying program as early as this summer in the U.S., amid signs the economy is gaining strength.

Elections Pass

Malaysia’s ringgit snapped an eight-week winning streak after economic growth slowed to the least since 2009. Prime Minister Najib Razak was re-elected in a May 5 poll, spurring a rally in the nation’s assets.

First-quarter gross domestic product rose 4.1 percent from a year earlier, less than a 6.5 percent increase in the preceding period and the 5.5 percent forecast in a Bloomberg survey, official data showed May 15.

“The ringgit, like most Asian currencies, is softer because of the dollar strength,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “The fact that Malaysia’s first-quarter GDP came in weaker than expected, despite election spending, means that it will take a lot more work to hold up investment in the nation.”

Elsewhere in Asia this week, Indonesia’s rupiah dropped 0.4 percent to 9,770 per dollar, the Philippine peso lost 0.1 percent to 41.18 and Vietnam’s dong declined 0.2 percent to 20,985. The Thai baht was unchanged at 29.78, while India’s rupee was steady at 54.885.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at Aprakash1@bloommberg.net

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