India’s rupee led the worst weekly loss for Asian currencies in more than a month as improving U.S. data added to speculation the Federal Reserve will pare monetary stimulus that’s fueled demand for emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, fell 0.6 percent to 115.32 as of 5:37 p.m. in Singapore, the biggest five-day decline since June 21. The rupee weakened 3.1 percent to 60.9575 per dollar, Malaysia’s ringgit slid 1.5 percent to 3.2578 and South Korea’s won dropped 1.1 percent to 1,123.79.
Most currencies across Asia weakened ahead of a U.S. Labor Department report today that may show companies hired 185,000 workers in June, compared with 2012’s average of 183,000. The Bloomberg U.S. Dollar Index rallied this week as data showed a pickup in manufacturing and growth, while claims for jobless benefit dropped to a five-year low. The Fed said July 31 it would maintain its $85 billion a month debt-buying program.
“Investors are paying more attention to the U.S. economic data than the Fed’s words,” said D.J. Park, a fixed-income analyst at Samsung Futures Inc. in Seoul. “Because the data has been better than expected, the tapering concerns are back.”
The rupee halted a three-week advance after the Reserve Bank of India held its benchmark interest rate at 7.25 percent on July 30, and said measures to shore up the rupee by creating a cash squeeze will be reversed once the exchange rate stabilizes.
Earlier in July, Governor Duvvuri Subbarao boosted two interest rates, curbed funding support for banks and raised lenders’ daily reserve requirements to buoy the rupee, which touched a record low of 61.2125 on July 8.
“The RBI statement suggested a policy dilemma,” said Vishnu Varathan, an economist at Mizuho Bank Ltd. in Singapore. “They are constrained because of low growth. They would rather ease policy but needed to tighten liquidity because of the weak rupee. That undermined a bit of confidence in the currency.”
The ringgit dropped to a three-year low of 3.2590 per dollar today after Fitch Ratings cut the nation’s credit outlook on July 30 to negative, adding to concerns global funds will accelerate asset sales.
Fitch cited rising debt levels for the move and said the nation’s public finances are its “key rating weakness,” spurring a 1.4 percent drop in the benchmark stock index this week, the worst performance since March. Overseas investors cut holdings of Malaysia’s fixed-income securities by 5 percent to $66 billion in June, central bank figures show, on prospects the Fed will pare stimulus.
“The ringgit’s drop this week was accelerated by the Fitch downgrade,” said Hamish Pepper, a currency strategist at Barclays Plc in Singapore. “People are pricing in a tapering from the Fed. The reason the ringgit will be most vulnerable is the possibility of further outflows from the bond market.”
The won fell for a fourth day, the longest losing streak since March. South Korea’s growth momentum is “weak,” Finance Minister Hyun Oh Seok said yesterday as data showed the country’s trade surplus narrowed and industrial production fell.
South Korea’s trade surplus decreased to $2.7 billion in July, compared with a revised $6 billion in June, according to government figures released yesterday. Industrial production contracted 2.6 percent in June from a year earlier, Statistics Korea said July 30.
“South Korea’s economic data didn’t meet expectations, which is worrisome,” said Kim Do Hee, a Seoul-based currency trader at Australia & New Zealand Banking Group Ltd. “But investors are more concerned about the Fed’s exit strategy.”
Elsewhere in Asia this week, Thailand’s baht weakened 0.8 percent to 31.40 per dollar, Taiwan’s currency slid 0.6 percent to NT$30.129, the Philippine peso dropped 0.7 percent to 43.61 and Indonesia’s rupiah fell 0.2 percent to 10,285. China’s yuan traded at 6.1294, compared with 6.1316 at the end of last week.