SINGAPORE — Indonesia's rupiah led a second weekly decline in Asian currencies, spurred by concern slowing economic growth in China will damp demand for exports from the rest of the region.
A gauge of Chinese manufacturing showed this week that factory output probably contracted for a fourth month in April, while the International Monetary Fund predicts the nation's expansion will slow to 7.5% in 2014 from 7.7% last year. Indonesia, Thailand and India are all facing national elections. In Indonesia, early results from a parliamentary vote this month showed no clear majority, increasing uncertainty on the outcome of the July presidential race.
"We've had some negative China headlines coming out," said Vishnu Varathan, a senior economist in Singapore at Mizuho Bank Ltd. "Asian currencies are struggling to hold on to the gains for the year. Some of the initial optimism about politics in the region has given way to concerns."
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region's 10 most-active currencies excluding the yen, dropped 0.4% from April 18 to 115.07. The rupiah slid 1.3% to 11,565 per dollar in its biggest five-day decline since December, while the Indian rupee lost 0.6% to 60.6250.
A preliminary reading for the Purchasing Managers' Index for Chinese manufacturing was at 48.3 in April, up from a final 48 in March, HSBC Holdings Plc and Markit Economics reported this week. The figure, which was below the dividing line of 50 between expansion and contraction, matched the median estimate in a Bloomberg News survey of economists.
Yuan losses
China's yuan dropped to a 16-month low of 6.2583 per dollar on Friday and had a weekly decline of 0.5%, its biggest in a month. Growth will ease further, Dong Tao, Credit Suisse Group AG's chief regional economist, said at a conference in Hong Kong on April 24, adding that he's pessimistic on the short- and medium-term outlooks.
"The pessimism on China remains and officials may prefer a weaker yuan to steer export growth," said Daniel Chan, a Hong Kong-based strategist at China Silver Global Investment Consultant Ltd.
Indonesia's currency fell this week on concern the potential for the nation's current-account deficit to widen will deter overseas investors, sending the rupiah to a seven-week low of 11,658 per dollar on April 23.
The shortfall probably exceeded 2% of gross domestic product in the first quarter, compared with 1.98% in the previous three months, central bank Governor Agus Martowardojo said on Bloomberg TV Indonesia last week.
Indonesia elections
The Indonesian Democratic Party of Struggle, the party of presidential frontrunner Joko Widodo who is popularly known as Jokowi, said on April 10 it is open to a coalition with nationalist groups after unofficial parliamentary-election results indicated it lacks sufficient support to nominate a leader on its own.
"The rupiah is on track to weaken," said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd in Singapore. "The market wants to see who Jokowi will partner with and their stance on the economy."
India's rupee headed for a fourth weekly drop, its longest losing streak since November, on concern national elections will fail to deliver a clear winner when votes are counted May 16. Most polls show Narendra Modi's Bharatiya Janata Party winning the most seats in the election while falling short of a majority, an outcome that will probably end the 10-year rule of Prime Minister Manmohan Singh's Congress party.
Overseas investors withdrew a net $1.5 billion from Indian corporate and government bonds this month through April 23, the biggest outflow since October, exchange data compiled by Bloomberg show.
Elsewhere in Asia this week, the Malaysian ringgit fell 0.9% to 3.2698 per dollar, the baht lost 0.3% to 32.262 and the Philippine peso dropped 0.5% to 44.645. Taiwan's currency declined 0.3% to NT$30.32, South Korea's won slipped 0.4% to 1,041.38, while the Vietnamese dong was steady at 21,100.