Asian Currencies Decline for Second Week on Geopolitical Risks

Asian currencies fell for a second week as the prospect of higher U.S. interest rates and worsening conflicts in the Middle East and Ukraine boosted demand for the relative safety of the dollar.

Ukraine’s government said pro-Russia rebels shot down a Malaysian Airlines plane yesterday, killing all 298 people on board, while Israel sent ground troops into Gaza as a cease-fire with Palestinian militants collapsed. The reports sparked losses in emerging-market currencies and stocks, while buoying assets such as Treasuries. Federal Reserve Chair Janet Yellen said July 15 that U.S. borrowing costs could be raised sooner than expected should the job market keep improving.

“People are avoiding emerging-market assets following the escalation of geopolitical risk in the Middle East,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “The plane crash didn’t help sentiment.”

The Bloomberg-JPMorgan Asia Dollar Index fell 0.1 percent this week to 116.09 as of 4:31 p.m. in Hong Kong. South Korea’s won led losses, dropping 1 percent to 1,029.32 per dollar, data compiled by Bloomberg show. India’s rupee weakened 0.6 percent to 60.2913 and Indonesia’s rupiah declined 0.2 percent to 11,618.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major counterparts, climbed 0.3 percent this week, the biggest increase since the five-day period ended on May 23.

China GDP

The prospect of higher rates in the U.S. “also had some impact on emerging-market currencies,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “Geopolitical risks are moving to the front at the moment.”

China’s currency received little support from data showing the economy expanded 7.5 percent in the second quarter from a year earlier, more than the 7.4 percent median estimate in a Bloomberg survey. The People’s Bank of China weakened the daily fixing for a sixth day today, the longest run of declines since November. The yuan fell 0.07 percent this week to 6.2080 per dollar, China Foreign Exchange Trade System prices show.

Elsewhere in Asia, Taiwan’s dollar fell 0.2 percent from July 11 to NT$30.051 against the greenback and Thailand’s baht was steady at 32.151. The Philippine peso and Malaysia’s ringgit gained 0.1 percent to 43.515 and 3.1835. Vietnam’s dong slipped 0.1 percent to 21,225.

(An earlier version of this story was corrected to show Asian currencies were headed for a second, not third, weekly drop.)

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