Asian Currencies Decline in Week as Yen Tumble Threatens Exports

Asian currencies fell for a second week, led by South Korea’s won and the Taiwan dollar, on concern the yen’s slide to a 2 1/2-year low will hurt exports from the region’s emerging-market economies.

The Bloomberg-JPMorgan Asia Dollar Index touched a two-month low today as a Bank of Korea board member warned of a global currency war. The yen weakened versus the dollar in each of the last four months amid speculation Japanese Prime Minister Shinzo Abe will favor more aggressive stimulus measures. The Federal Reserve said Jan. 30 it will maintain its $85 billion of monthly debt purchases, a policy that spurs the flow of funds to emerging markets. India’s rupee was headed for a weekly advance after the central bank cut interest rates for the first time in nine months.

“Major Asian economies are looking for ways, such as currency depreciation, to counter a sliding yen’s impact on competitiveness,” said Bruce Yam, a currency strategist at Sun Hung Kai Financial Ltd. in Hong Kong. “Yet, quantitative easing in major economies means investors will look to Asia for higher-yielding assets.”

The Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, lost 0.3 percent this week as of 4:15 p.m. in Hong Kong, following a 0.6 percent decline in the five days ended Jan. 25. The won fell 2.1 percent to 1,097.38 per dollar, the biggest loss since May, according to data compiled by Bloomberg. Taiwan’s dollar dropped 1.4 percent to 29.668. Japan, South Korea and Taiwan compete in the world market for electronic products and autos.

‘Fear Factor’

The won sank as much as 0.9 percent to a three-month low of 1,098.25 per dollar today as global funds cut holdings of Korean stocks for a seventh day, the longest run of reductions since November. Net sales totaled $1.7 billion in January, the most since May.

A global currency war seems to be breaking out as monetary easing in Japan drags the yen lower, Ha Sung Keun, a Bank of Korea board member, said on Jan. 28 in Seoul. South Korea’s government wants to cut the “vicious cycle” in which fast money inflows increase the won’s volatility, Deputy Finance Minister Choi Jong Ku said Jan. 30.

“The won’s drop this week was largely due to fear stoked by the expectation that the yen would erode the competitiveness of Korea,” said Wai Ho Leong, a Singapore-based economist at Barclays Plc. “The mention of a transaction tax on currency trading accentuated the fear factor in the market.”

Intervention Risk

Taiwan’s dollar completed the biggest weekly slide in 16 months on speculation the central bank will intervene to protect exports. Policy makers warned on Jan. 29 they will enter the currency market if “irregular factors,” such as large fund flows, cause excessive volatility,

“The central bank’s been carefully watching other Asian currencies,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp., which oversees $700 million.

The rupee advanced 0.7 percent this week to 53.33 per dollar as the Reserve Bank of India said cooling inflation provides some room for further policy easing, after reducing the repurchase rate to 7.75 percent from 8 percent on Jan. 29. It reached 53.0650 yesterday, the strongest level since Oct. 18.

China’s yuan halted a two-day gain as the lowering of the central bank’s daily fixing forced the currency to weaken to stay within its 1 percent permitted trading range. The spot rate fell 0.13 percent today to 6.2270 per dollar in Shanghai. It lost 0.1 percent this week.

The world’s second-largest economy’s Purchasing Managers’ Index was 50.4 in January, the national statistics bureau said today, lower than 50.6 in December and a median forecast of 51 in a Bloomberg News survey of economists. A reading above 50 indicates expansion.

Elsewhere in Asia, Indonesia’s rupiah weakened 1 percent to 9,750 per dollar, the Thai baht gained 0.3 percent to 29.82 and the Philippine peso lost 0.1 percent to 40.71. Vietnam’s dong was little changed at 20,845. Malaysia’s financial markets were closed today for a holiday.