Asian currencies fall on outflow risks as US interest rate hike nears
Malaysia’s ringgit and the South Korean won led losses in Asia on prospects the growing possibility that the US will raise interest rates next month 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 US 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 1.2 percent as of 10:31am in Kuala Lumpur, the biggest loss in almost three weeks, according to prices from local banks compiled by Bloomberg . It is down 19 percent this year in Asia’s worst performance amid a plunge in commodity prices. The won declined 0.9 percent and the Indonesian rupiah retreated 0.8 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 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 US 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 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 US 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 13.5 basis points to 3.27 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 on as a US rate increase looms.
Elsewhere in Asia, the Chinese yuan weakened 0.13 percent. Taiwan’s dollar rose 0.3 percent and both the Vietnamese dong and Philippine peso gained 0.1 percent. Thailand’s baht was little changed. The Bloomberg-JPMorgan Asia Dollar Index dropped to a one-month low.
- Bloomberg
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