Indonesia’s rupiah led a decline in Asian currencies this week as slowing economic growth in China dimmed the region’s export outlook.
China, the No. 1 destination for shipments from Indonesia, Taiwan, Thailand and South Korea, reported July 15 that expansion slowed for a second quarter. Apart from the rupiah and Malaysia’s ringgit, regional currencies weakened by 0.2 percent or less, as a reassurance from the Federal Reserve that a tapering of stimulus is not imminent supported inflows.
“Asian nations’ dependence on China has been increasing and uncertainty surrounding China’s growth is raising concern about the region’s export outlook,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo.
The rupiah dropped 0.8 percent this week to 10,078 per dollar yesterday in Jakarta, according to prices from local banks compiled by Bloomberg. Malaysia’s ringgit weakened 0.5 percent to 3.1923 and Taiwan’s dollar lost 0.2 percent to NT$29.978. China’s yuan was little changed at 6.1379.
Asia’s largest economy expanded 7.5 percent from a year earlier in the second quarter, official data showed this week, slowing from a 7.7 percent gain in the preceding three months and a 7.9 percent increase in the final quarter of 2012. There is an increasing risk that China will fall short of the International Monetary Fund’s full-year growth forecast of 7.75 percent, the lender said July 17.
Fed Chairman Ben S. Bernanke said this week the U.S. central bank will respond to economic data and may even increase its bond-buying program if indicators don’t meet its expectations. His comments in May and June that the Fed may taper the program, which has driven emerging-market inflows, sparked a slide in Asian currencies, debt and shares.
Foreign funds bought $1.3 billion more Taiwanese, South Korean and Thai stocks than they sold in the first four days of the week, exchange data show.
The rupiah fell for a record 11th day yesterday and weakened beyond the 10,000 per dollar level this week for the first time since 2009. Bank Indonesia Deputy Governor Perry Warjiyo said July 11 the monetary authority has supplied dollars to the market in the past two to three months while allowing the rupiah to slowly retreat. Foreign-exchange reserves dropped $7.1 billion in June, the most since September 2011, according to central bank data.
“We expect pressure on the spot rate to continue,” said Thio Chin Loo, senior currency analyst at BNP Paribas SA in Singapore. “Bank Indonesia is releasing its hold because draining the reserves is uncomfortable for them, so this allows pent-up dollar demand to go through.”
The People’s Bank of China cut the yuan’s fixing on four of five days this week, lowering it to 6.1751 per dollar yesterday, 0.2 percent less than on July 12. The currency can trade as much as 1 percent either side of the reference rate. The yuan is the only gainer among the 11 most-traded Asian exchange rates this year, strengthening 1.5 percent.
China should widen the yuan’s trading band and accelerate capital-account convertibility, according to a front-page commentary in the China Securities Journal.
“Frustration with the yuan’s appreciation policy is causing them to consider alternatives,” Tim Condon, head of Asian research at ING Groep NV in Singapore, wrote in a report yesterday, adding that ING was reviewing its yuan forecast for a downward revision.
Elsewhere in Asia, India’s rupee rose 0.5 percent this week to 59.35 per dollar yesterday on speculation the central bank intervened. The Philippine peso strengthened 0.1 percent to 43.362, Thailand’s baht rose 0.4 percent to 31.03 and South Korea’s won rose 0.2 percent to 1,121.75. Vietnam’s dong was steady at 21,223.