Asian currencies set for worst week since 2008, ringgit at 17-year low
KUALA LUMPUR, Aug 14 — Asian currencies headed for the worst week in seven years as China’s surprise yuan devaluation deepened concerns about a slowdown in the world’s second-biggest economy.
Malaysia’s ringgit and Indonesia’s rupiah sank to 17-year lows and stock markets across the region tumbled after the People’s Bank of China cut the yuan’s reference rate by 1.9 per cent Tuesday, triggering its biggest decline in two decades. The move came days after data showed Chinese exports shrank for a fifth month in July, adding pressure on exchange rates that were already depreciating amid signs the Federal Reserve will raise interest rates for the first time in a decade.
“The primary reason for weaker Asian currencies has been the one-off devaluation of the Chinese yuan and the subsequent depreciation,” said Jason Daw, head of Asia currency strategy at Societe Generale AG in Singapore. “We expect further downward pressure leading up to expected Fed tightening.”
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, retreated 2.1 per cent from Aug 7, poised for its biggest weekly drop since October 2008. The ringgit slumped 4.3 per cent, the yuan sank three per cent, the rupiah fell 1.8 per cent, while India’s rupee weakened 2.1 per cent. Vietnam’s dong slid 1.3 per cent after the central bank widened the currency’s trading band Wednesday.
Ringgit vulnerable
The yuan recorded its steepest two-day fall since 1994 following devaluation, before the declines eased as China’s central bank signaled support for the currency and amid speculation the authorities intervened to limit its slide.
The rupiah plunged to 13,831 a dollar Wednesday, the weakest since July 1998, after Indonesian President Joko Widodo named a former central bank chief as economy minister in a cabinet revamp aimed at boosting growth. The ringgit also sank to a 17-year low this week, sliding beyond four per US dollar as investors shrugged off better-than-expected economic data to focus on a drop in energy prices that’s cutting earnings for Malaysia, a net oil exporter.
Malaysia’s gross domestic product rose 4.9 per cent last quarter from a year earlier, more than the 4.5 per cent median estimate in a Bloomberg survey, data showed Thursday. The current-account surplus narrowed to RM7.6 billion from RM10 billion, but beat the forecast RM6.1 billion.
“With oil prices lower overnight and the market looking past yesterday’s better Malaysian second-quarter GDP and current-account numbers, ringgit remains vulnerable,” said Khoon Goh, a strategist at Australia & New Zealand Banking Group Ltd in Singapore.
Elsewhere in Asia, Taiwan’s dollar fell 1.2 per cent this week, the Philippine peso declined 1.1 per cent and Thailand’s baht weakened 0.3 per cent. — Bloomberg
