Asia currencies decline as Chinese data compounds growth concern

[HONG KONG] Asian currencies extended the week's loss as a gauge of Chinese manufacturing fell to a 15-month low, adding to concern that the region's growth is slowing.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-active currencies excluding the yen, dropped to its lowest level since 2010 and posted a third weekly decline. China's data follows a July 23 report that showed expansion in South Korea decelerated in the three months through June for a fifth quarter. A slump in commodity prices also weighed on exchange rates of Asia's raw-material exporters, just as the US prepares to raise borrowing costs.

"China is Asia's largest economy and its slowdown has a spillover effect on the region's outlook," said Stella Lee, president of Success Wealth Management Ltd in Hong Kong.

"A US rate hike looks set in stone, so that could trigger fund rotation from emerging markets to the US."

Thailand's baht led losses, falling 2.1 per cent in its biggest weekly drop since 2007, data compiled by Bloomberg show. The won declined 1.8 per cent and the Taiwan dollar 0.7 per cent.

The baht weakened beyond 35 per dollar on Friday for the first time since May 2009. Bank of Thailand Assistant Governor Chantavarn Sucharitakul told reporters on Thursday that the central bank was closely monitoring the market because the currency's losses may make it difficult for the economy to adjust.

As the US prepares to tighten monetary policy, global investors sold a net US$1.5 billion of stocks and bonds in Thailand and South Korea this week, exchange data show.

In Malaysia, one-month ringgit forwards dropped for a fifth week, the longest stretch of 2015, amid falling oil prices that are eroding the nation's export earnings. The spot rate was little changed from July 17 and is Asia's worst-performing currency this year. A report on Thursday showed foreign-exchange reserves decreased to the lowest in almost five years, suggesting the central bank intervened to stem the losses.

"The ringgit will continue to remain under pressure given the fall in oil prices and data showing a fall in reserves," said Khoon Goh, a strategist at Australia & New Zealand Banking Group Ltd in Singapore.

The Philippine peso dropped for a third week, falling 0.6 per cent, and reached a five-year low against the dollar on Friday. Slowing inflation may give the central bank room to cut the amount of cash lenders must set aside as reserves, monetary board Member Felipe Medalla said on July 15.

Elsewhere this week, Indonesia's rupiah declined 0.7 per cent and touched the lowest level since the Asian financial crisis that roiled markets in 1997-98. India's rupee was down 0.7 per cent from July 17 in afternoon trading in Mumbai. China's yuan and Vietnam's dong were unchanged.

BLOOMBERG