Rupiah Leads Weekly Drop in Asian Currencies on Fed Taper Bets

Indonesia’s rupiah posted the biggest loss among Asian currencies this week as a U.S. budget agreement and improving economic data added to speculation the Federal Reserve will taper stimulus.

The Bloomberg-JPMorgan Asia Dollar Index dropped 0.3 percent in the past five days, its worst week in more than a month. U.S. retail sales climbed in November by the most since June, a Dec. 12 report showed, as the House of Representatives passed a bipartisan budget that will ease automatic spending cuts, reduce the deficit and avert another government shutdown.

“People are now pricing in a bigger chance of Fed tapering in December, especially since U.S. retail sales data was very strong,” said Trang Thuy Le, a Singapore-based currency strategist at Credit Suisse AG. The fact that the U.S. budget is “no longer an issue means the Fed can easily start tapering in December,” she said.

The rupiah fell 1.3 percent from Dec. 6 to 12,118 per dollar in Jakarta, taking its drop since the end of October to 7 percent, data compiled by Bloomberg show. It touched 12,122 earlier, the weakest level since March 2009. India’s rupee lost 1.1 percent to 62.1250 during the five days, snapping a three-week gain.

The share of economists predicting a reduction in the Fed’s $85 billion of monthly bond purchases at its Dec. 17-18 meeting doubled to 34 percent in a Dec. 6 Bloomberg survey, from a Nov. 8 poll.

Indonesia, India

Indonesia’s current-account deficit helped make the rupiah Asia’s worst-performing currency this year. The central bank held interest rates at 7.5 percent this week, the highest level in more than four years. Indonesia will keep its policy stance tight in 2014 to restore investor confidence, Senior Deputy Governor Mirza Adityaswara said in a Dec. 4 interview.

Credit Suisse is betting on further declines in the rupiah, partly because Bank Indonesia failed to increase borrowing costs, which the bank says shows policy makers prefer to support economic growth rather than take steps to contain inflation. “This doesn’t bode well for the currency,” Le said.

India, which along with Indonesia is grappling to rein in a current-account deficit, saw consumer prices climb 11.2 percent in November from a year earlier, more than the 10 percent median estimate in a Bloomberg survey of economists, data showed on Dec. 12. That’s the highest in Asia. Factory output contracted 1.8 percent, compared with the 1.2 percent projected slide.

“Bad data points coming out of India depressed sentiment, especially in light of a market move to price in a December taper,” Credit Suisse’s Le said.

Won Intervention

South Korea’s won and the Thai baht bucked the week’s losses, rising 0.5 percent to 1,052.55 and 0.3 percent to 32.052 against the greenback.

The won appreciated 8.5 percent since the end of June, the biggest gain among the 11 most-traded Asian currencies tracked by Bloomberg. Asia’s fourth-largest economy posted a $4.8 billion trade surplus in November, compared with a four-month high of $4.9 billion in October.

“Upward pressure on the won will remain, although the market is on the lookout for intervention,” said Han Sung Min, a Seoul-based currency dealer at Busan Bank. “There was a stream of dollar sales from engineering and electronics makers and shipbuilders this week, and there seems to be more to come.”

Thai Turmoil

The baht halted a six-week decline and touched the strongest level since Nov. 25 this week after Prime Minister Yingluck Shinawatra dissolved parliament to defuse anti-government protests. An election is scheduled for February.

“We see at least some steps being taken to avoid the imminent risk of the worst scenario on the Thai political scene, which somewhat helped improve investor sentiment,” said Tsutomu Soma, manager of the fixed-income business unit at Rakuten Securities Inc. in Tokyo. “Gains in the baht may be limited amid Fed taper talk.’

Elsewhere in Asia, the Philippines peso slipped 0.5 percent this week to 44.165 per dollar and Malaysia’s ringgit dropped 0.1 percent to 3.2357, data compiled by Bloomberg show. China’s yuan climbed 0.17 percent to 6.0712 and Vietnam’s dong strengthened 0.1 percent to 21,110. Taiwan’s dollar lost 0.1 percent to NT$29.689.

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