Rupiah Leads Asian Currency Losses as Fed Tapering Seen in March

Indonesia’s rupiah led losses in Asian currencies this week as signs of improvement in the U.S. economy boosted bets the Federal Reserve will trim stimulus, a policy that’s driven demand for emerging-market assets.

The rupiah fell for a third week as overseas investors pulled a combined $1.4 billion from stocks in Indonesia, the Philippines, South Korea, Taiwan and Thailand, exchange data show. A deadly typhoon that hit the Philippines on Nov. 8 spurred the biggest five-day drop in the peso since August, while political unrest in Thailand weighed on the baht. Reports from the U.S. this month showed economic growth and employment beat economists’ estimates.

“The U.S. economy seems to be recovering,” said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. “On the other hand, there was the typhoon in the Philippines and political concern in Thailand, which weighed on sentiment. All in all, the momentum is for a stronger dollar and weaker regional currencies.”

Indonesia’s currency dropped 1.8 percent this week to 11,619 per dollar as of 3:35 p.m. in Jakarta and reached 11,675 on Nov. 13, the lowest level since Sept. 30, according to prices from local banks compiled by Bloomberg. India’s rupee fell 1 percent to 63.12 per dollar, the peso weakened 1.1 percent to 43.65 and Malaysia’s ringgit slipped 0.7 percent to 3.2023.

Fed Stimulus

Janet Yellen, the nominee for chairman of the Federal Reserve to replace Ben S. Bernanke when his term expires, stressed this week that the U.S. economy still needs the stimulus program to ensure a sustainable recovery. The Fed will delay any cut to its $85 billion of monthly bond purchases until March, according to the median estimate of 32 economists in a Bloomberg survey conducted Nov. 8.

U.S. manufacturing unexpectedly picked up in October, while American employers added 204,000 to payrolls, a figure that topped the most optimistic forecast in a Bloomberg survey of economists and followed a 163,000 increase in September, reports showed. The Bloomberg U.S. Dollar Index dropped 0.2 percent this week, its first five-day loss since Oct. 25.

“Asian currencies are reacting to the payrolls data,” said Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore. “Yellen tapered the tapering fears.”

Elsewhere in Asia, the Thai baht lost 0.4 percent this week to 31.61 against the greenback and Taiwan’s dollar dropped 0.4 percent to NT$29.62. South Korea’s won rose 0.1 percent to 1,063.53 while China’s yuan was little changed at 6.0922. Vietnam’s dong was steady at 21,099.

Thai Unrest

The rupiah recovered some losses this week after central bank data showed the current-account deficit narrowed to 3.8 percent of gross domestic product last quarter, from a record 4.4 percent in the period through June. Bank Indonesia raised its reference rate by 25 basis points to 7.5 percent on Nov. 12, an unexpected move that lifted the benchmark to the highest level in more than four years.

The baht reached a two-month low of 31.705 per dollar on Nov. 11 as overseas investors cut holdings of the nation’s assets on concern political protests against a government amnesty bill will slow economic growth. Prime Minister Yingluck Shinawatra has struggled to contain the unrest as people rallied in opposition to legislation that would provide amnesty for political offenses in the years after a 2006 coup, including her brother Thaksin, the country’s former leader.

“The protests have lasted quite some time already and that encouraged fund outflows, weighing on the baht and Thai assets,” said Soma of Rakuten Securities. “We’ve seen a recovery in the U.S., and it’s better to put money there rather than in a country which has political risk.”

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