Asian currencies fell this week, led by South Korea’s won and Malaysia’s ringgit, as signs Chinese growth is slowing and political tension in Ukraine deterred risk-taking.
The Bloomberg-JPMorgan Asia Dollar Index declined 0.3 percent from March 7 as data showed exports from the region’s largest economy slumped and growth in factory output eased. Crimea votes on whether to leave Ukraine and join Russia March 16 with the U.S. and Germany stepping up pressure on Moscow over its support for secession. Federal Reserve policy makers meeting on March 18-19 will decide whether to proceed with another $10 billion cut to their monthly debt purchases.
“There’s risk aversion with the upcoming Ukraine referendum and weakness in China’s industrial production numbers,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “Our view is that the Fed will continue with the pace of the taper.”
The won fell 1.1 percent since March 7 to 1,072.78 per dollar, its biggest weekly drop since the period ended Jan. 24, according to data compiled by Bloomberg. The ringgit weakened 0.7 percent to 3.2801, completing its first five-day loss since January, and the Philippine peso declined 0.6 percent to 44.655.
Fed officials meeting next week to decide on further stimulus cuts will weigh reports this month that show employment picked up in February, retail sales rose for the first time since October and consumer confidence improved. China’s factory production climbed 8.6 percent in January and February from a year earlier, the weakest start to a year since 2009, data from the National Bureau of Statistics showed March 13. Exports dropped 18.1 percent in February, the most since 2009, a report showed March 8.
The yuan fell 0.36 percent this week to 6.1502 per dollar and the currency’s 12-month non-deliverable forwards dropped 1 percent to 6.2113, the sharpest decline since November 2011.
“While everybody expects the U.S. to start flashing positive light, people are also concerned about how slow China’s growth will be,” said Wong Chee Seng, a currency strategist at AmBank Group in Kuala Lumpur. “This combination will translate into a risk-off environment.”
Global funds pulled $1.5 billion from South Korean and Indian stocks this week, while pumping $376 million into Taiwanese, Thai and Philippine equities, exchange data show.
The Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to 2 percent on March 12, to bolster an economy that has been harmed by prolonged political unrest. The baht fell 0.1 percent this week to 32.275 per dollar.
Standard Chartered Plc is more bullish on the prospects for emerging-market currencies in the second half of the year, with the Indonesian rupiah and India’s rupee likely to lead total returns, analysts led by Singapore-based Callum Henderson wrote in a research note yesterday.
Pakistan’s rupee jumped 4.2 percent this week, its biggest five-day advance since 2000, as a rebound in the nation’s foreign reserves won confidence.
Finance Minister Ishaq Dar said March 12 that the nation’s currency stockpile climbed to $9.52 billion following international contributions of about $1.5 billion to the Pakistan Development Fund, from $8.3 billion at the end of 2013. The local currency strengthened amid optimism inflows from a planned global bond offering, an auction of third-generation mobile-phone licenses and an International Monetary Fund loan will further improve external finances.
Elsewhere in Asia, Taiwan’s dollar slipped 0.3 percent to NT$30.381 against its U.S. counterpart. Indonesia’s rupiah climbed 0.8 percent to 11,355, the Indian rupee fell 0.2 percent to 61.1900 and Vietnam’s dong was steady at 21,100.