MUMBAI/KUALA LUMPUR — Asian currencies declined for a fourth week, led by the Philippine peso and Malaysia’s ringgit, as an improving US economy bolstered speculation the Federal Reserve will raise interest rates next year.
A gauge of dollar strength climbed to a four-year high as data this week showed August’s new-home sales in the world’s largest economy were the strongest since 2008. An increase in interest rates by the Fed may reduce the attraction of higher-yielding emerging-market assets. Currencies in Malaysia, the Philippines and Taiwan all slid to their weakest levels in more than four months versus the greenback.
The Bloomberg-JPMorgan Asia Dollar Index declined 0.3% since Sept 19, contributing to the longest run of weekly losses since May 2013. The ringgit retreated 0.8% versus the US currency, the Philippine peso fell 0.6%, Indonesia’s rupiah lost 0.5% and India’s rupee dropped 0.5%. China’s yuan rose 0.2% and South Korea’s won was little changed.
“The general risk sentiment is starting to get a bit shaky,” said Sean Yokota, Singapore-based head of Asian strategy at Skandinaviska Enskilda Banken AB.
“The uncertainty related to Fed policy is making investors a bit more cautious.”
Traders see a 75% chance the Fed will raise its target for overnight lending between banks by its September 2015 meeting, futures data compiled by Bloomberg showed on Sept 25. That’s up from 73% on Sept 1.
The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, increased 1.1% this week and touched the highest level since June 2010.
Stock outflows
The rupee completed a third weekly loss as global funds pulled about $415 million from the nation’s stocks and bonds during Sept 23-24, the latest exchange data show. The currency pared the decline yesterday, rising 0.3%, after Standard & Poor’s raised India’s sovereign-rating outlook to stable from negative. S&P also raised the outlook on its South Korea rating to positive from stable on Sept 19, supporting the won against the dollar after three weeks of declines.
Equity markets in Indonesia, South Korea and Taiwan saw combined outflows of $2.1 billion this week. The baht dropped 0.4% against the US currency this week and Taiwan’s dollar depreciated 0.2%.
The peso fell for the fourth week in a row as a report showed the Philippine trade balance unexpectedly swung to a deficit in July. Imports exceeded exports by $33 million in July, government data showed, while the median estimate of economists in a Bloomberg survey was for a $181-million surplus.
The yuan strengthened as a report indicated an unexpected pickup in China’s manufacturing this month. A preliminary reading of the Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was 50.5, compared with the 50.0 median estimate in a Bloomberg survey and last month’s 50.2 final figure.