Asian Currencies Drop in Week on China Slowdown Signs, Fed Taper

Asian currencies declined for a third week, led by the Thai baht and Malaysia’s ringgit, amid concern a slowdown in China and U.S. stimulus cuts will deepen a selloff in emerging markets.

The Bloomberg JPMorgan-Asia Dollar Index (ADXY) fell 0.1 percent this week as a report signaled China’s manufacturing contracted for the first time in six months. The Federal Reserve said Jan. 29 it will pare its monthly bond purchases by $10 billion to $65 billion from February, following a similar reduction in January. The baht had its worst week in almost a month after global funds pulled money from the nation’s assets amid concern a Feb. 2 election will trigger more violence.

“China has a big impact on the risk of emerging markets,” said Thomas Harr, Singapore-based head of local market strategy at Standard Chartered Plc. “That is weighing on Asia combined, with other concerns about tapering and political uncertainty in emerging markets.”

Thailand’s baht weakened 0.5 percent during the week to 33.02 per dollar in Bangkok, according to data compiled by Bloomberg. The ringgit fell 0.5 percent this week through yesterday to 3.3486, Indonesia’s rupiah dropped 0.3 percent to 12,210, while the Philippine peso was steady at 45.318. The Chinese yuan slipped 0.2 percent to 6.06.

Most financial markets in Asia were shut yesterday for the Chinese New Year holiday, except for Thailand and India. Taiwan and South Korea closed from Jan. 30.

‘Hard-Landing Fears’

A Purchasing Managers’ Index for China fell to 49.5 in January from 50.5 the previous month, HSBC Holdings Plc and Markit Economics reported Jan. 30. The reading compared with the median 49.6 estimate in a Bloomberg News survey of economists. A number below 50 indicates contraction.

China may experience more distressed trusts this year as economic growth slows, after investors in a 3-billion-yuan ($495 million) product that faced default were bailed out, Standard & Poor’s credit analyst Liao Qiang wrote in an e-mailed report on Jan. 29.

“We expect China hard-landing fears to be a source of occasional bouts of emerging-market stress this year,” Tim Condon, Singapore-based head of Asian research at ING Groep NV, wrote in a note on Jan. 30. “The Fed statement gave a new lease on life to the emerging-market stress.”

Thai Election

The baht touched the lowest level in almost three weeks yesterday as official data showed international investors sold $499 million more Thai equities and bonds than they bought in the first four days of the week. Prime Minister Yingluck Shinawatra has declared a state of emergency and is deploying 10,000 police in Bangkok alone for the Feb. 2 poll as she seeks to avoid a repeat of violence that obstructed advance voting on Jan. 26.

Suthep Thaugsuban, the former opposition party power broker leading the street campaign, has announced plans for a march across Bangkok on the day of the vote. Ten people have been killed and 584 injured since the protests began on Oct. 31, according to the Bangkok Emergency Medical Service.

“We have seen demand for the dollar on concern about the situation before the election,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl. “There’s the Fed’s tapering that caused emerging-market asset selloffs plus, we have this political unrest. No one would like to put money in Thailand unless we have solutions.”

The ringgit hit the weakest level since May 2010 on Jan. 30 after Bank Negara Malaysia kept its benchmark interest rate at 3 percent on Jan. 29 to shield growth. Consumer prices rose 3.2 percent in December from a year earlier, the most in two years, a report showed last week. Global investors held 29 percent of Malaysian sovereign debt at the end of November, compared with 18 percent in Thailand, official data show.

Fed Tapering

“People are turning cautious because of the Fed’s resolve to continue to cut bond purchases,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “Asian economies with high foreign ownership of bonds such as Malaysia are vulnerable. Bank Negara’s decision to hold its policy rate also didn’t help.”

Elsewhere in Asia, India’s rupee was little changed this week at 62.6575 per dollar. South Korea’s won climbed 0.9 percent to 1,070.30 on Jan. 29, while the Taiwanese dollar advanced 0.1 percent to NT$30.376.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net

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

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