Asian Currencies Decline This Week as Fed Taper Spurs Outflows

Most Asian currencies fell this week as signs of an improving U.S. economy bolstered demand for the dollar amid tapering from the Federal Reserve that’s spurring outflows from emerging markets.

Global funds pulled $3.6 billion from South Korean, Thai, Philippine and Indonesian stocks so far in December as the Fed prepares to pare stimulus in January, exchange data show. The Thai baht led losses this week as the two-month-long political protests escalated, raising concerns about economic growth and tourism. Trading was muted due to closures in many markets for the Christmas holidays, according to Malayan Banking Bhd.

“Most Asian currencies weakened because of the broad dollar strength,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking in Singapore. “The positive U.S. data also supports the case for further Fed tapering.”

The baht depreciated 0.8 percent from Dec. 20 to 32.873 per dollar in Bangkok, having touched 32.882, the weakest level since February 2010, according to data compiled by Bloomberg. Indonesia’s rupiah fell 0.4 percent to 12,263 before touching a five-year low of 12,281.

The Fed announced Dec. 18 it will trim its monthly bond purchases to $75 billion from $85 billion starting next month. Initial jobless claims dropped more than forecast last week to 338,000, while consumer confidence climbed.

Thai Unrest

The rupiah is leading the year’s declines among Asian currencies, having fallen 21.4 percent as investors anticipated a cut in U.S. stimulus. The Indian rupee slumped 11.1 percent, the Philippine peso dropped 7.5 percent and Malaysia’s ringgit 7 percent, according to data compiled by Bloomberg.

“When you look into 2014, the Fed taper has given people an excuse to support the dollar,” said Gundy Cahyadi, a Singapore-based economist at DBS Group Holdings Ltd. “In Asia, some economies such as Thailand and Indonesia are grappling with a lot of political noises.”

The baht fell for a second week and is down 7 percent in 2013, headed for its worst annual performance since 2000. The Election Commission urged the government to delay a Feb. 2 poll after protesters tried to storm a Bangkok arena where candidates were registering, sparking a riot that killed one person and injured 128.

There’s been a series of street demonstrations aimed at toppling Prime Minister Yingluck Shinawatra, who dissolved parliament on Dec. 9. The baht’s drop has been “orderly,” as the market adjusts to the Fed’s stimulus reduction and the political unrest, Bank of Thailand spokeswoman Roong Mallikamas said Dec. 23.

Christmas Week

South Korea’s won and the peso bucked the weakening trend. Trading is quiet this week and could remain that way through the New Year as most people are still away on holidays, Malayan Banking’s Supaat said.

The won strengthened 0.7 percent from Dec. 20 to 1,054.36 per dollar, following a decline of 0.8 percent last week, data compiled by Bloomberg show. It rallied 1.4 percent to 10.05 against the yen, rising for a seventh straight week. In 2013, the won climbed 1 percent versus the dollar, trailing a gain of 2.7 percent in the Chinese yuan, Asia’s best performance.

The South Korean currency’s movements versus the yen have been “relatively fast” and are “problematic,” Vice Finance Minister Choo Kyung Ho said Dec. 19.

Korea Intervention

Manufacturers’ business confidence rose to 79 for January, from this month’s 78, according to official data yesterday. The Bank of Korea will manage its policy rate next year to support economic growth and ensure price stability, the central bank said in an e-mailed statement after a board meeting on Dec. 26.

“Exporters may sell dollars as it’s the end of the month and the year,” Sun Sung In, a Seoul-based economist at Shinhan Investment Corp., wrote in a research note yesterday. “The yen has rapidly weakened against the won, and investors are aware of the risk of possible intervention by the authorities.”

Elsewhere in Asia this week, India’s rupee increased 0.3 percent to 61.8450 per dollar and the ringgit was little changed at 3.2877. While Taiwan’s currency slipped 0.2 percent to NT$30.025, the Philippine peso gained 0.3 percent to 44.380 and Vietnam’s dong rose 0.1 percent to 21,095. China’s yuan traded at 6.0686, compared with 6.0713 on Dec. 20.

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