Bloomberg News

Asian Currencies Drop as Bernanke Comment Boosts Dollar, Stocks Retreat

March 01, 2012

Asian currencies weakened, led by Thailand’s baht, after the Federal Reserve refrained from signaling more monetary easing measures as the U.S. economy improves, boosting demand for the dollar.

The baht was headed for the biggest drop in five months as a technical gauge signaled the region’s top gainer in February was poised to reverse. Malaysia’s ringgit and Indonesia’s rupiah snapped two-day advances after Fed Chairman Ben S. Bernanke affirmed U.S. interest rates are likely to stay low through late 2014, without offering any indication that further monetary easing is under consideration.

“We have seen quite a fast appreciation recently and investors probably wanted to take profits,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Bernanke’s comments encouraged some buy-back of the dollars.”

The baht slumped 0.9 percent to 30.52 per dollar as of 3:50 p.m. in Bangkok, according to data compiled by Bloomberg. The ringgit dropped 0.4 percent to 3.0025 and the rupiah fell 0.2 percent to 9,088. China’s yuan weakened 0.10 percent to 6.3002 and India’s rupee slid 0.4 percent to 49.1988.

The MSCI Asia-Pacific Index (DXY) of stocks declined 0.9 percent while the Dollar Index that tracks the greenback against the currencies of its six largest trading partners jumped yesterday from a three-month low. The Fed said yesterday the U.S. economy expanded at a “modest to moderate pace” in January and early February as factories increased production.

Technicals, IMF

The dollar’s 14-day relative strength index against the baht slid below the 30 threshold yesterday, suggesting its drop in February was overdone. The baht rallied 2.2 percent last month and touched 30.21 yesterday, the strongest since Sept. 15.

The Bloomberg-JPMorgan Asia Dollar Index (ADXY) rose 2 percent this year, fueled by foreign investors buying $22 billion more equities than they sold in India, South Korea, Taiwan and Thailand, according to stock exchange data.

Market intervention is likely to be optimal in emerging markets to counter a “sudden surge in capital inflows” and remove economic dislocation from temporary appreciation in currencies, the International Monetary Fund said in a report on its website.

The yuan had its biggest decline since Feb. 6 as the central bank weakened its reference rate by 0.15 percent to 6.3016, from a record yesterday. That eclipsed an official report showing manufacturing in the world’s second-biggest economy improved for a third month in February, based on a survey of purchasing managers.

Philippine Rate Cut

“The fixing reflects a rebound in the greenback as another round of quantitative easing looks unlikely now,” said Kenix Lai, a currency analyst at Bank of East Asia Ltd. in Hong Kong. “China’s manufacturing data should be good news but investors might want to look for another month of data to confirm the recovery trend.”

The Philippine peso declined 0.2 percent to 42.82 per dollar. The central bank lowered its benchmark interest rate to 4 percent from 4.25 percent today, a move predicted by 14 of 18 economists in a Bloomberg survey. Three expect no change and one a cut to 3.75 percent.

Elsewhere, Taiwan’s dollar reversed earlier gains to post a 0.2 percent loss at NT$29.487 against its U.S. counterpart. Vietnam’s dong was little changed at 20,830. Financial markets in South Korea were closed for a holiday.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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