Fed's taper plan hits Asian currencies

December 22, 2013

Madrid-Spain (Dec 23)  Asian currencies retreated last week, led by the Thai baht and Malaysia's ringgit, after the Federal Reserve said it will pare stimulus that has fueled demand for emerging-market assets. Global funds pulled $259 million from Thai, Philippine and Vietnamese stocks in the first four days of the week, according to exchange data.

The Bloomberg US Dollar Index climbed 0.8 per cent from Dec. 13 , poised for its biggest weekly gain since the period ended November 1 . "Asian currencies' weakness has largely been driven by the Fed's tapering announcement," said Nick Verdi , a foreign exchange strategist at Barclays in Singapore. "What we're seeing into year-end is a lot of dollar shorts are being covered." The baht depreciated 1.7 per cent last week to 32.600 per dollar in Bangkok , its worst five-day performance since August, according to data compiled by Bloomberg . The ringgit slumped 1.6 per cent to 3.2880, a ninth straight weekly decline and its longest losing streak since November 2005 . Indonesia's rupiah fell 0.8 per cent to 12,213 and earlier touched a five-year low of 12,255. Market volatility Asian policy makers braced for market reactions after the taper announcement. South

Korea will act preemptively if needed to counter any currency volatility, Vice-Finance Minister Choo Kyung Ho said by phone in Seoul on December 19 , and the Philippine central bank said it will watch for any need to fine-tune policy. Malaysia is strengthening fiscal policy to handle the impact of tapering, Second Finance Minister Ahmad Husni Hanadzlah told reporters on December 19 . Capital is expected to flow out of Thailand because of the reduction in stimulus, Arkhom Termpittayapaisith, secretary-general of the National Economic & Social Development Board , said in national television broadcast. The baht touched a three-year low of 32.650 per dollar on Friday. Elsewhere in Asia , Taiwan's dollar retreated one per cent to NT$29.980 against its US counterpart last week.

South Korea's won fell 0.8 per cent to 1,061.20, the Philippine peso dropped 0.7 per cent to 44.495 and India's rupee advanced 0.1 per cent to 62.04. China's yuan and Vietnam's dong were little-changed at 6.0713 and 21,100, respectively.

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