South Korea’s won and Taiwan’s dollar led declines in Asian currencies this week on speculation the Federal Reserve will further cut stimulus as the U.S. economy improves.
The Bloomberg-JPMorgan Asia Dollar Index snapped a two-week advance as data showed companies in the world’s largest economy last month added the most workers since November 2012 and jobless claims declined. The won had its biggest five-day loss since the period ended Dec. 20 amid concern a weak yen will hurt South Korea’s exports.
“Asian currencies are bearing some of the brunt of the dollar strength that is being brought about by better U.S. data,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “That encouraged the market to think that the Fed taper will persist.”
The won depreciated 0.6 percent this week to 1,061.38 per dollar in Seoul, data compiled by Bloomberg show. Taiwan’s dollar fell 0.6 percent to NT$30.212, while the Singapore dollar dropped 0.3 percent to S$1.2703. Thailand’s baht declined 0.2 percent to 33.070 and the Philippine peso lost 0.1 percent to 44.700.
Fed officials saw diminishing economic benefits from their bond-buying program, according to the minutes of the Federal Open Market Committee’s Dec. 17-18 meeting published this week. The central bank said last month it will cut its monthly bond buying by $10 billion to $75 billion starting January.
The U.S. Labor Department said Jan. 9 the number of applications for unemployment benefits declined by 15,000 to 330,000 in the period ended Jan. 4, the fewest since November.
The won reached an eight-week low of 1,070.72 on Jan. 7 as Goldman Sachs Group Inc. recommended selling the currency, saying the threat to exports from the yen’s weakness may prompt the Bank of Korea to cut interest rates. The central bank held the benchmark rate at 2.5 percent on Jan. 9.
Governor Kim Choong Soo said that while Asia’s fourth-largest economy is growing near its potential, the yen may hurt its automobile, steel and machinery industries. The won gained 7 percent in the past six months against the dollar, while the yen lost 5 percent, prices compiled by Bloomberg show.
“There’s a perception the won may have lost its competitiveness due to yen weakness,” Bank of Singapore’s Sim said. “The expectation of a rate cut spurred won weakness.”
South Korea will act against “herd behavior” and try to stabilize markets, Vice Finance Minister Choo Kyung Ho said in Seoul yesterday.
Taiwan’s dollar dropped to a six-month low of NT$30.35 on Jan. 7 amid speculation the central bank intervened to keep exporters competitive with South Korean and Japanese companies.
Shipments from Taiwan, which make up about 60 percent of the economy, fell 1.9 percent from a year earlier in December, according to an official report this week. That compares with growth of 7.1 percent in Korea, while the latest numbers from Japan show exports increased 18.4 percent in November. Global investors bought $181 million more of the island’s stocks than they sold this week through Jan. 10, exchange data show.
“Funds seem to be entering Taiwan now, but the currency has dropped a lot, so I tend to think it was the result of central bank intervention,” said Andrew Tsai, a Taipei-based economist at KGI Securities. If the Korean won continues to depreciate, Taiwan’s dollar will follow, Tsai added.
China’s yuan touched a 20-year high yesterday after the central bank raised the currency’s reference rate and as data showing faster import growth boosted optimism local demand is reviving.
The People’s Bank of China strengthened the yuan’s fixing by 0.17 percent, the most in two weeks, to 6.1008 per dollar. Overseas shipments rose 4.3 percent from a year earlier, while imports increased 8.3 percent, leaving a narrower-than-projected trade surplus of $25.64 billion, the General Administration of Customs said yesterday in Beijing.
The yuan traded 0.05 percent higher at 6.0521 per dollar yesterday in Shanghai, little changed from 6.0515 at the end of last week, China Foreign Exchange Trade System prices show. It earlier touched 6.050, matching a Jan. 2 high that was the strongest level since the government unified the market and official exchange rates at the end of 1993.
Elsewhere in Asia, Malaysia’s ringgit rose 0.6 percent to 3.2695 per dollar, India’s rupee gained 0.4 percent to 61.9050, while Indonesia’s rupiah advanced 0.1 percent to 12,162.