Asian currencies had a third weekly loss on concern the Federal Reserve will scale back stimulus that has spurred fund flows to emerging markets.
The Bloomberg-JPMorgan Asia Dollar Index touched a six-week low yesterday after Federal Reserve Chairman Ben S. Bernanke said May 22 its $85 billion a month of bond-buying, known as quantitative easing, may be tapered if the U.S. economy shows a sustained improvement. The yuan reached a 19-year high today as the central bank set a record fixing even after data indicated manufacturing in Asia’s largest economy will contract in May.
The Asia Dollar Index, which tracks the 10 most-active currencies excluding the yen, fell 0.1 percent this week to 117.31 as of 4:14 p.m. in Hong Kong. India’s rupee declined 1.1 percent to 55.50 per dollar, South Korea’s won dropped 0.9 percent to 1,127.05 and the Philippine peso fell 1 percent to 41.595. The yuan rose 0.19 percent to 6.1302. Financial markets in Thailand and Malaysia are closed today for holidays.
“Investors prefer to hold safer assets after Bernanke’s comments on the QE exit plan,” said Son Eun Jeong, an analyst at Woori Futures Co. in Seoul.
The won had a third weekly decline, the longest losing streak since the period ending March 22. Bank of Korea Governor Kim Choong Soo said today a possible U.S. exit from its stimulus program would cause volatility in other nations. The Dollar Index, which tracks the greenback against the currencies of six major trading partners, touched a 2010 high yesterday.
A preliminary reading of the Chinese Purchasing Managers’ Index fell to 49.6 in May, according to HSBC Holdings Plc and Markit Economics yesterday. That compares with the 50.4 median estimate in a Bloomberg News survey. Fifty is the dividing line between expansion and contraction.
The peso was poised for its biggest decline since the five days ended Aug. 17. The drop is due to “dominant external factors” including the Chinese manufacturing report and the Fed comments, Bangko Sentral ng Pilipinas Governor Amando Tetangco said today.
Chinese Premier Li Keqiang reiterated the country was making progress in opening up its capital account. Industrial and Commercial Bank of China Ltd.’s Singapore branch said yesterday it will start offering yuan clearing services from May 27. The PBOC raised the daily fixing 0.13 percent to 6.1867 per dollar, a record since a peg to the greenback ended in July 2005.
“The PBOC fixing and more adoption of yuan in offshore markets are positive for the exchange rate,” said Bruce Yam, a foreign-exchange strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “There continues to be capital flowing into China, driving demand for the currency.”
Taiwan dollar forwards are set for their biggest weekly advance in a month as a plan to cut taxes on stock investments attracted global funds to the island’s shares. Overseas funds bought $107 million more local equities than they sold this week through yesterday, taking inflows this year to $4.9 billion, according to exchange data. One-month non-deliverable forwards rose 0.5 percent this week to NT$29.932 per dollar. The spot climbed 0.1 percent to NT$30.03.
Elsewhere in Asia this week, Indonesia’s rupiah dropped 0.2 percent to 9,775 per dollar and Vietnam’s dong was little changed at 20,995. Malaysia’s ringgit fell 0.4 percent to 3.033 yesterday and the Thai baht declined 0.3 percent to 29.95.