Azernews.Az

By Bloomberg

Asian currencies headed for their biggest monthly drop since November, led by South Korea’s won, on signs the Federal Reserve is moving closer to raising interest rates.

Fed Chair Janet Yellen said May 22 that she expects to increase benchmark borrowing costs this year if the U.S. economy meets her forecasts. In Northeast Asia, the Japanese yen’s slide to a 12-year low is eroding the export competitiveness of South Korea and Taiwan and risks exacerbating a currency war.

The weakness in Asian currencies “has been more of a function of dollar strength,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “The dollar strength will continue to weigh on Asian currencies as the Fed prepares to raise interest rates.”

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, fell 0.8 percent this month as of 12:10 p.m. in Hong Kong. The won weakened 3.2 percent, set for its biggest drop in six months, Malaysia’s ringgit declined 2.4 percent and Thailand’s baht depreciated 2.2 percent, data compiled by Bloomberg show.

The yen has tumbled 18 percent against the greenback in the past 12 months as Japan pressed ahead with record monetary stimulus, while the won lost 7.8 percent and Taiwan’s dollar fell 2.1 percent. The Korea International Trade Association called for policy makers in Seoul to steady the exchange rate on Thursday as Taiwan’s central bank stepped up intervention to weaken its currency.

Korea, Taiwan

The Taiwan dollar and the won “are lagging the yen’s move, and over the longer term they will catch up,” said Eddie Cheung, a foreign-exchange strategist at Standard Chartered Plc in Hong Kong. “Northeast Asian exports have been weak, so that should argue that there’s probably a bit more room for downside for these two currencies.”

The ringgit fell this month as the price of Brent crude dropped 5.4 percent following a 21 percent jump in April. Cheaper oil weighs on government finances in Malaysia, a net exporter of the commodity.

Elsewhere in Asia, Indonesia’s rupiah declined 1.9 percent this month against the greenback, India’s rupee lost 0.5 percent and the Philippine peso slipped 0.1 percent. Taiwan’s dollar strengthened 0.3 percent, while China’s yuan was little changed.