The Bloomberg-JPMorgan Asia Dollar Index dropped 0.2 percent in the past five days, its worst week in more than a month. U.S. retail sales climbed in November by the most since June, a report showed yesterday, as the House of Representatives passed a bipartisan budget that will ease automatic spending cuts, reduce the deficit and avert another government shutdown.
“People are now pricing in a bigger chance of Fed tapering in December, especially since U.S. retail sales data was very strong,” said Trang Thuy Le, a Singapore-based currency strategist at Credit Suisse AG. The fact the U.S. budget is “no longer an issue, means the Fed can easily start tapering in December,” she said.
The rupee fell 1.1 percent from Dec. 6 to 62.0750 per dollar as of 10:09 a.m. in Mumbai, snapping a three-week gain, data compiled by Bloomberg show. Indonesia’s rupiah lost 1 percent to 12,083, taking its drop since the end of October to 6.7 percent.
The share of economists predicting a reduction in the Fed’s $85 billion of monthly bond purchases at its Dec. 17-18 meeting doubled to 34 percent in a Dec. 6 Bloomberg survey, from a Nov. 8 poll.
India, which along with Indonesia is grappling to rein in a current-account deficit, saw consumer prices climb 11.2 percent in November from a year earlier, more than the 10 percent median estimate in a Bloomberg survey of economists, data showed yesterday. That’s the highest in Asia. Factory output contracted 1.8 percent, compared with the 1.2 percent projected slide.
“Bad data points coming out of India depressed sentiment, especially in light of a market move to price in a December taper,” Credit Suisse’s Le said.
South Korea’s won and the Thai baht bucked the week’s losses, rising 0.5 percent to 1,052.96 and 0.2 percent to 32.98 against the greenback.
The won appreciated 8.5 percent since June 30, the biggest gain among the 11 most-traded Asian currencies tracked by Bloomberg. Asia’s fourth-largest economy posted a $4.8 billion trade surplus in November compared with a four-month high of $4.9 billion in October.
“Upward pressure on the won will remain, although the market is on the lookout for intervention,” said Han Sung Min, a Seoul-based currency dealer at Busan Bank. “There was a stream of dollar sales from engineering and electronics makers and shipbuilders this week, and there seems to be more to come.”
The baht halted a six-week decline and touched the strongest level since Nov. 26 this week after Prime Minister Yingluck Shinawatra dissolved parliament to defuse anti-government protests. An election is scheduled for February.
“We see at least some steps being taken to avoid the imminent risk of the worst scenario on the Thai political scene, which somewhat helped improve investor sentiment,” said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. “Gains in the baht may be limited amid Fed-taper talk.”
Indonesia’s current-account deficit helped make the rupiah Asia’s worst-performing currency this year. The central bank held interest rates at 7.5 percent yesterday, the highest level in more than four years. Indonesia will keep its policy stance tight in 2014 to restore investor confidence, Senior Deputy Governor Mirza Adityaswara said in a Dec. 4 interview.
Credit Suisse is betting on further declines in the rupiah, partly because Bank Indonesia failed to increase borrowing costs, which the bank says shows policy makers prefer to support economic growth rather than take steps to contain inflation. “This doesn’t bode well for the currency,” Le said.
Elsewhere in Asia, the Philippines peso slipped 0.6 percent this week to 44.215 per dollar and Malaysia’s ringgit dropped 0.1 percent to 3.2356, data compiled by Bloomberg show. China’s yuan climbed 0.16 percent to 6.0720, Taiwan’s dollar advanced 0.2 percent to NT$29.604 and Vietnam’s dong strengthened 0.1 percent to 21,110.