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Rupee Leads Losses in Asian Currencies This Week on Fed Outlook

India’s rupee led losses in Asian currencies this week as overseas investors cut holdings of the region’s stocks on speculation U.S. policy makers will cut stimulus this year.

The Bloomberg-JPMorgan Asia Dollar Index fell 0.3 percent in the five days through yesterday, after a 0.5 percent drop in the prior period. Third-quarter U.S. expansion topped estimates and growth in service industries accelerated last month, data showed this week. Economists surveyed by Bloomberg Oct. 17-18 predicted the Fed would begin paring stimulus in March.

“Asian currencies declined this week as markets think the Fed will scale back its stimulus earlier than expected,” said Leong Sook Mei, Southeast Asian head of global markets research in Singapore at Bank of Tokyo-Mitsubishi UFJ Ltd. “Flows are not coming back.”

The Indian rupee lost 1.2 percent from Nov. 1 to 62.475 per dollar in Mumbai, according to prices from local banks compiled by Bloomberg. Indonesia’s rupiah weakened 0.7 percent to 11,410, Thailand’s baht fell 0.9 percent to 31.475 and Malaysia’s ringgit dropped 0.3 percent to 3.1794.

Overseas funds sold $1 billion more South Korean, Thai, Indonesian and Philippine stocks than they bought this week, exchange data show.

The U.S. had a 2.8 percent annualized gain in gross domestic product, compared with a 2.5 percent increase in the prior three months and a 2 percent advance forecast in a Bloomberg survey, Commerce Department figures showed Nov. 7. The Institute for Supply Management’s non-manufacturing index increased to 55.4 from 54.4 in September. The median estimate of economists was for a drop to 54.

Rupee, Rupiah

The rupee fell to a five-week low of 62.7513 yesterday. The Reserve Bank of India has cut direct dollar supplies to oil refiners by 30 percent to 40 percent, Economic Affairs Secretary Arvind Mayaram told CNBC TV-18.

“U.S. dollar demand from local oil companies as the RBI scales back its FX swaps is likely to weaken the case for rupee strength,” Morgan Stanley analysts led by New York-based Rashique Rahman wrote in a report Nov. 7.

The rupiah had a second weekly decline after data showed gross domestic product rose 5.6 percent last quarter from a year earlier, the slowest pace since 2009. The nation recorded trade deficits in seven of the first nine months of this year.

The baht touched a four-week low of 31.515 per dollar yesterday on concern anti-government protests triggered by a proposed amnesty law for political offenses will deepen a slowdown in Southeast Asia’s second-biggest economy.

Political Unrest

Prime Minister Yingluck Shinawatra called Nov. 7 for an end to street demonstrations in Bangkok after agreeing to scrap the controversial amnesty bill.

“Prolonged political unrest will hurt the economy that’s already weak and, with the current mood, foreigners probably don’t want to put money in Thailand,” said Tohru Nishihama, an economist covering emerging markets at Dai-ichi Life Research Institute Inc. in Tokyo. “The political situation will weigh on the baht, which may underperform its regional peers.”

Elsewhere in Asia, South Korea’s won dropped 0.4 percent this week to 1,064.90 per dollar and the Taiwanese dollar slipped 0.1 percent to NT$29.505. The Chinese yuan advanced 0.15 percent to 6.0905, while the Philippine peso gained 0.1 percent to 43.188. Vietnam’s dong was steady at 21,100.

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