Asian Currencies Snap Four-Week Advance as Yen Slides Beyond 101

Asian currencies completed the first weekly loss in more than a month on speculation the yen’s slide to beyond 101 per dollar will prompt some regional policy makers to weaken their exchange rates to protect exports.

The Bloomberg-JPMorgan Asia Dollar Index lost 0.3 percent since May 3, the first decline since the period ended April 5, and dropped by the most in nine months on May 9. The Bank of Japan’s stimulus measures to fight deflation have contributed to a 15 percent drop in the yen against the dollar this year, threatening the exports of nations that compete with Japan in international markets.

“With the yen’s weakness, there’s generally downward pressure on regional currencies,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “Intervention is possible in some countries where their currency has been rising.”

The won dropped 0.8 percent this week to 1,106.39 per dollar, data compiled by Bloomberg show. The currency fell 1.4 percent yesterday. India’s rupee lost 1.6 percent to 54.80 and the Philippine peso weakened 0.6 percent to 41.13. Thailand’s baht lost 0.2 percent to 29.75, falling 1.2 percent yesterday.

The BOJ’s aggressive monetary easing has a big impact on South Korea, Bank of Korea Governor Kim Choong Soo said at a briefing on May 9 after the central bank unexpectedly cut its benchmark seven-day repurchase rate by a quarter percentage point to 2.5 percent. The won has strengthened 13 percent against the yen this year and weakened 3.8 percent against the dollar.

Intervention Speculation

“Speculation is rising that authorities may intervene in the market to protect the won,” said Choi Sung Hyun, a currency trader at Woori Bank Co. in Seoul. “Exporters may repatriate their income from overseas, which may support the won above the 1,100 level against the dollar.”

The baht fell for a second day yesterday as Finance Minister Kittiratt Na-Ranong said the Bank of Thailand should reduce its benchmark rate by more than a quarter of a percentage point or implement capital controls to stem gains.

“The baht fluctuates based on what officials have been saying and Kittiratt’s comment moved it,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl. “Rate cuts by central banks in Asia also put pressure on the Bank of Thailand to follow suit. Speculation of a rate cut in Thailand is growing.”

China’s yuan halted a three-day advance yesterday as the central bank lowered its fixing by the most in 10 months, forcing the currency to weaken to stay within the permitted trading range. The yuan fell 0.18 percent to 6.1417 per dollar in Shanghai, paring this week’s gain to 0.23 percent.

Elsewhere, Taiwan’s dollar declined 0.6 percent this week NT$29.8 against its U.S. counterpart and Indonesia’s rupiah was little changed at 9,734. Malaysia’s ringgit rose 1.4 percent to 2.993 after Prime Minister Najib Razak’s ruling coalition prevailed at elections held last weekend. Vietnam’s dong was steady at 20,935.

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