Asia Currencies Stabilize Following Biggest Slide Since 2012

Hong Kong (Nov 2)  An index tracking Asian currencies stabilized in October, following September’s biggest drop since 2012, as the rupiah rose on optimism Indonesia’s new government will spur the economy.

The Bloomberg-JPMorgan Asia Dollar Index was little changed in October, after falling 1.4 percent in September in the steepest decline since May 2012. The rupiah strengthened 0.8 percent to 12,085 per dollar, the Indian rupee advanced 0.6 percent.

Joko Widodo, who was sworn in as Indonesia’s president on Oct. 20, has pledged to cut fuel subsidies and boost economic growth to more than 7 percent. A 23 percent slide in Brent crude since the end of June is helping cool inflation and narrow the budget deficit in India, which imports almost 80 percent of its oil. Asian currencies are still vulnerable to potential changes in U.S. interest rates, according to Australia & New Zealand Banking Group Ltd.

“The rupiah benefited from some positive political developments in the lead-up to Joko Widodo’s inauguration, while lower oil prices are seen to benefit the rupee the most,” said Khoon Goh, ANZ’s currency strategist in Singapore. Regional currency gains “were later partly unwound following a more hawkish than expected statement from the Federal Reserve. I expect the dollar to be stronger,” he said.

Fund Outflows

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, rose to the highest level since 2010 after the Fed decided to end its asset-purchase program and Japan unexpectedly added monetary stimulus. Global funds pulled a combined $4 billion in October from stocks in India, Indonesia, the Philippines, South Korea, Taiwan and Thailand, according to exchange data.

The yuan rose 0.8 percent in October in Hong Kong offshore trading after global use of the currency climbed to a record and on optimism the economy will pick up through year-end.

The yuan’s share of global payments rose to an all-time high in September and it ranked seventh in terms of usage, the Society for Worldwide International Financial Telecommunications said this week.

Source: Bloomberg