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Asian Currencies Snap 4-Week Rally on Fed as Rupiah to Yuan Fall

Asian currencies ended a four-week advance as U.S. economic data fueled speculation the Federal Reserve will taper its stimulus sooner than economists expected.

The Bloomberg-JPMorgan Asia Dollar Index slumped by the most in more than two months as China’s yuan had its worst five-day drop in more than a year. Malaysia’s ringgit, Thailand’s baht and the Philippine peso fell by the most in a month and India’s rupee posted a third weekly decline.

Global funds pulled money out of equities in Indonesia, Thailand and the Philippines and cut buying of Indian stocks. The Federal Open Market Committee maintained its $85 billion in monthly bond purchases on Oct. 30, noting the world’s largest economy is showing signs of “underlying strength.” U.S. data released Oct. 31 showed a drop in jobless claims, while a gauge of business activity jumped the most in three decades.

“Speculation on the timing of the FOMC’s tapering has increased after the Fed’s positive tone on the economy,” said Hong Seok Chan, a currency analyst at Daishin Economy Research Institute in Seoul. “Foreign fund flows into equities have slowed.”

The Asia Dollar Index lost 0.4 percent after gaining 1.2 percent in the preceding four weeks. The rupiah slumped 2.8 percent in the five days to 11,334 per dollar and the yuan, which touched a 20-year high on Oct. 25, retreated 0.25 percent to 6.0995. The rupee weakened 0.4 percent to 61.73 and the ringgit fell 0.4 percent to 3.1707.

Tapering Bets

Economists at Citigroup Inc. and Barclays Plc said the Fed’s policy statement opens the possibility of a reduction in bond purchases as soon as December. The odds of tapering in January rose to 45 percent, from 25 percent before the FOMC decision, according to Citigroup. Economists surveyed by Bloomberg Oct. 17-18 had predicted the Fed would begin paring stimulus in March.

Jobless claims decreased by 10,000 to 340,000 in the week ended Oct. 26 from 350,000 in the prior period, the Labor Department reported Oct. 31 in Washington. The median forecast of 49 economists surveyed by Bloomberg called for a decrease to 338,000. The MNI Chicago Report business barometer climbed to 65.9 in October from 55.7 in September.

The Taiwan dollar slipped 0.1 percent against the greenback for the week to NT$29.47. The island’s central bank intervened to prevent its currency from gaining beyond NT$29.40, the Economic Daily reported yesterday, citing unnamed traders.

South Korea’s won was 0.1 percent stronger for the week at 1,060.80 per dollar, and has gained 5.8 percent in the past three months. The currency touched a two-week low of 1,065.45 yesterday. The government will take steps to curb “herd behavior” in the currency market, Finance Minister Hyun Oh Seok said in Seoul on Oct. 31.

Thailand’s baht weakened 0.6 percent to 31.20 per dollar, halting two weeks of gains. The Southeast Asian nation’s lower house passed a bill granting amnesty for political offenses yesterday, stoking street protests. Elsewhere, the Philippine peso declined 0.4 percent to 43.215 and Vietnam’s dong was little changed at 21,095 per dollar.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Yewon Kang in Seoul at ykang51@bloomberg.net

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

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