Rupiah, rupee lead Asia weekly drop

Indonesia’s rupiah and the Indian rupee led declines among Asian currencies this week on concern the two nations’ trade deficits will widen after violence in Iraq caused a spike in global oil prices.

Brent crude reached a nine-month high of $115.71 per barrel on June 19 as militants closed in on Baghdad, capital of the Organization of Petroleum Exporting Countries’ second-largest producer. The Bloomberg-JPMorgan Asia Dollar Index recorded its first weekly drop this month and Vietnam’s dong weakened after the central bank devalued the currency for the first time in a year to boost exports.

“The situation in Iraq is of concern,” said Ho Woei Chen, an economist at United Overseas Bank Ltd in Singapore. “Emerging-market currencies, especially those with problematic external balances and a reliance on imported oil, are vulnerable.”

The rupiah slid 1.5% this week to 11,972 per dollar in Jakarta on Friday and the rupee fell 0.7% to 60.1875, prices from local banks compiled by Bloomberg show. The Chinese yuan declined 0.3% to 6.2260, The baht dropped 0.2% to 32.452 and the dong weakened 0.4% to 21,310. The Asia Dollar Index, which tracks the region’s most-traded currencies excluding the yen, lost 0.3% to 115.72.

Fed dovish

The rupiah touched 12,027 per dollar on June 18, the weakest level since Feb 13. Indonesia, a former Opec member, is unlikely to become a net oil exporter again, leaving policy makers to grapple with a long-term revenue shortfall as production shrinks, Finance Minister Chatib Basri said in a June 18 interview. Fuel imports made up 23% of the country’s overseas purchases in April.

The rupee declined for a fourth week, its longest losing streak since April. India’s trade shortfall reached a 10-month high of $11.2 billion in May and wholesale-price inflation accelerated to this year’s fastest pace at 6.01%, reports showed this month.

Federal Reserve chair Janet Yellen brushed aside concerns about quickening inflation, saying on June 18 that US borrowing costs are likely to stay low “for a considerable time” after the end of the central bank’s bond purchases.

The Fed’s pledge will keep some Asian currencies supported as funds flow into emerging markets, according to Sook Mei Leong, the Southeast Asia head of global markets research at Bank of Tokyo-Mitsubishi UFJ Ltd in Singapore.

“Some Asian currencies continue to hold up very well,” she said. The Fed is still dovish, which is positive for risk-taking, Mr Leong said.

Elsewhere in Asia, Taiwan’s dollar and the Philippine peso were little changed this week at NT$30.065 and 43.79, respectively. Malaysia’s ringgit fell 0.2% to 3.2235 and South Korea’s won slipped 0.3% to 1,020.61.

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