Asian Currencies Drop Most in Week Since January on Yen Weakness

Asian currencies dropped by the most since January this week on speculation regional central banks will allow their exchange-rates to depreciate to keep exports competitive with Japan, where the yen fell to a four-year low.

South Korea’s won and the Taiwan dollar are more sensitive to yen weakness because companies such as Samsung Electronics Co. and Sony Corp. compete for global market share. Those exchange rates, along with Malaysia’s ringgit, led this week’s drop. Asian currencies also fell amid rising demand for the dollar, after U.S. retail sales beat economists’ forecasts.

“Policy makers in countries competing with Japan remain sensitive about the yen’s move and there are some intervention concerns in these markets,” said Koji Fukaya, chief executive officer and foreign-exchange strategist at FPG Securities Co. in Tokyo. “There’s also general dollar strength on the back of optimism over the U.S. economic recovery.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active currencies excluding the yen, declined 0.5 percent from a week ago to 117.42 yesterday. That was the biggest drop since the period ending Jan. 25. The won dropped 1 percent to 1,117.10, the ringgit weakened 1 percent to 3.0220 and the Taiwan dollar fell 0.9 percent to NT$30.06. South Korea’s markets were shut yesterday for a holiday.

Follow Trend

The won touched a three-week low of 1,118.96 per dollar on May 16 after the Financial Services Commission said in an e-mailed statement that it will monitor market risks, including the weak yen, and take preemptive measures if needed. Finance Minister Hyun Oh Seok said companies should strengthen their competitiveness because the yen is likely to stay low for “quite some time,” according to a Yonhap News report this week.

Japan’s currency reached 103.31 per dollar yesterday in Tokyo, the weakest level since October 2008. It has lost 16 percent this year, the most in Asia.

“The yen will probably weaken” further this year, said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “Currencies like the Taiwan dollar and the won will follow the trend.”

The Dollar Index, which tracks the greenback against the currencies of six major trading partners, rose 1.3 percent this week, the most since February. Federal Reserve Bank of San Francisco President John Williams said May 16 the central bank may cut its $85 billion monthly bond-buying program as early as this summer in the U.S., amid signs the economy is gaining strength.

Elections Pass

Malaysia’s ringgit snapped an eight-week winning streak after economic growth slowed to the least since 2009. Prime Minister Najib Razak was re-elected in a May 5 poll, spurring a rally in the nation’s assets.

First-quarter gross domestic product rose 4.1 percent from a year earlier, less than a 6.5 percent increase in the preceding period and the 5.5 percent forecast in a Bloomberg survey, official data showed May 15.

“The ringgit, like most Asian currencies, is softer because of the dollar strength,” said Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd. “The fact that Malaysia’s first-quarter GDP came in weaker than expected, despite election spending, means that it will take a lot more work to hold up investment in the nation.”

Elsewhere in Asia this week, Indonesia’s rupiah dropped 0.2 percent to 9,757 per dollar yesterday, the Philippine peso lost 0.2 percent to 41.193 and Vietnam’s dong declined 0.2 percent to 20,985. India’s rupee slipped 0.2 percent to 54.885, China’s yuan was little changed at 6.1419 and the Thai baht fell 0.3 percent to 29.86.

Before it's here, it's on the Bloomberg Terminal.