Rupiah Leads Asian Currencies’ Decline on Fed Taper Speculation

Asian currencies fell this week, led by the Indonesian rupiah’s decline to a four-year low, on concern signs of a U.S. economic recovery will back the case for a reduction in stimulus that has fueled emerging-market inflows.

U.S. service industries grew in August at the fastest pace in almost eight years and companies added workers, data showed this week. Non-farm payrolls are forecast to rise before the Federal Reserve meets Sept. 17-18 to review its bond-buying program. Barclays Plc says yields on 10-year Treasuries, which reached a two-year high yesterday, will lure investors as exchange data show global funds pulled $141 million from Indian, Indonesia, Philippines and Thai stocks this week.

“The battle, which all currencies in Asia are facing, is rising U.S. Treasury yields and the Fed meeting later in the month,” said Hamish Pepper, a currency strategist at Barclays in Singapore. “Ultimately, that’s going to cap any appreciation in Asian currencies in the near term.”

The rupiah declined 2.3 percent this week to 11,175 per dollar as of 10:44 a.m. in Jakarta and reached a four-year low of 11,205 earlier, prices from local banks show. Malaysia’s ringgit weakened 1 percent to 3.3170, the Thai baht retreated 0.9 percent to 32.425 and the Indian rupee depreciated 0.6 percent to 66.0638.

Morgan Stanley lowered its 2013 and 2014 growth forecasts for the four largest Southeast Asian economies of Indonesia, Malaysia, Singapore and Thailand, citing a weaker-than-expected first half and an uncertain outlook, economist Deyi Tan wrote in Sept. 3 note.

Indonesia, Malaysia

Indonesia’s trade deficit reached a record $2.3 billion in July as exports fell on lower global commodity prices, official data showed Sept. 2. The nation’s current-account shortfall will narrow in the third quarter, from about 4.4 percent of gross domestic product in the previous three months as a slowing economy and higher fuel prices curb imports, Finance Minister Chatib Basri said in a Sept. 5 interview.

The ringgit was headed for its biggest weekly loss in three on speculation outflows will accelerate should the Fed begin tapering stimulus this month. Foreign holdings of Malaysian government and corporate debt securities fell 5.7 percent in July to 216 billion ringgit ($65 million), the biggest drop since September 2011, the latest central bank figures show.

Prime Minister Najib Razak raised fuel prices on Sept. 3, the first increase since 2010, and delayed some state building projects with high import content to address a shrinking current-account surplus. The measures came after Fitch Ratings said that Malaysia faced the prospect of a rating cut due to its weak fiscal position.

Won Advances

The Bloomberg-JPMorgan Asia Dollar Index was little changed this week at 114.26, as the South Korean strengthened 1.3 percent to 1095.45 per dollar and Taiwan’s dollar advanced 0.6 percent to NT$29.796.

Non-farm payrolls in the world’s largest economy probably increased 180,000 in August after a gain of 162,000 in July, according to the median estimate of economists in a Bloomberg survey before data due today.

President Barack Obama is seeking diplomatic backing for a U.S. military strike on Syria as he attends a meeting of the Group of 20 nations in St. Petersburg, Russia.

“The biggest focus in the market now is the U.S. employment data to assess the outlook for the Fed’s reduction in stimulus,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Emerging-market currencies and assets are under downward pressure at this moment. Syria tensions are adding to weak sentiment.”

Elsewhere in Asia, China’s yuan was little changed this week at 6.1203 per dollar, the Philippine peso climbed 0.2 percent to 44.515 and Vietnam’s dong strengthened 0.1 percent to 21,140.

To contact the reporter on this story: 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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