Asian Currencies Fall on Outflow Risks as Fed Move Edges Closer

Updated on
  • Odds of a December Fed rate hike climbed to 68 percent
  • China's export and import data in October missed estimates

Malaysia’s ringgit and the South Korean won led losses among emerging-market currencies on prospects higher U.S. interest rates will spur capital outflows as domestic assets become less appealing.

The ringgit declined to a one-month low after a report on Friday showed American employers added 271,000 jobs in October, the most in a year. A gauge of the dollar was near the highest level in Bloomberg-compiled data going back to 2004 as futures traders raised bets for monetary tightening in the U.S. in December to 68 percent from 56 percent the day before the numbers. Asian currencies also fell after a report from China, the biggest overseas market for many regional economies, reaffirmed growth is slowing.

The ringgit slumped 1.4 percent in Kuala Lumpur, the biggest loss in two months, according to prices from local banks compiled by Bloomberg. It is down 20 percent this year in Asia’s worst performance amid a plunge in commodity prices. The won declined 1.3 percent and the Indonesian rupiah retreated 0.6 percent.

“The strong dollar is central in this move today as the non-farm payrolls was very strong,” said Nizam Idris, head of currencies and fixed-income strategy at Macquarie Bank Ltd. in Singapore. “China news was poor and that didn’t help.”

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major counterparts, was little changed after last week’s 1.9 percent rally took it to its 2004 high. Chinese exports and imports both fell by more than economists estimated last month, dropping 6.9 percent and 18.8 percent, respectively, data showed over the weekend. Figures for new loans, retail sales and factory output are due later this week.

Asia’s emerging economies are vulnerable to outflows spurred by higher U.S. interest rates because global funds own a significant portion of their debt. Overseas investors hold 37 percent of Indonesian government bonds, 30 percent of Malaysian notes and 16 percent of Thai securities, official data show.

China’s bonds tumbled on Monday, with the 10-year yield rising 12 basis points to 3.25 percent, on concern the resumption of initial public offerings will damp demand. Equivalent debt in Malaysia, Indonesia, South Korea, the Philippines, Thailand and Taiwan also fell as a U.S. rate increase looms.

Elsewhere in Asia, the Chinese yuan weakened 0.14 percent, Taiwan’s dollar and the Thai baht each depreciated 0.3 percent. The Vietnamese dong fell 0.2 percent and the Philippine peso gained 0.5 percent. The Bloomberg-JPMorgan Asia Dollar Index dropped to a one-month low.