Worst monthly showing by Asian currencies

HONG KONG • Asia's currencies posted their biggest monthly loss in three years, led by Malaysia's ringgit, after a yuan devaluation heightened the risk of a currency war in the region as the US prepares to raise interest rates.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region's 10 most-active currencies excluding the yen, retreated 2.6 per cent in August, the biggest monthly decline since May 2012.

Global funds sold about US$10 billion (S$14 billion) more equities than they bought in South Korea, India, Taiwan, Thailand, Indonesia and the Philippines, the latest exchange data shows.

China's surprise devaluation of its currency on Aug 11 sparked concern that other Asian countries will favour depreciation to protect exports.

The ringgit shed 8.6 per cent last month, the worst performance since 1998, as a political scandal sapped confidence and a plunge in commodity prices dimmed the outlook for Malaysian shipments. Indonesia's rupiah fell 3.8 per cent, the most in 11 months, and the yuan declined 2.7 per cent as its one-month implied volatility quadrupled amid a shift to a more market-determined exchange rate.

South Korea's won had a fourth monthly drop, the longest run of losses since 2008, as weak manufacturing data added to concern the economy is slowing just as the US prepares to raise interest rates.

The Singapore dollar was down 0.7 per cent to a five-year low after the yuan was devalued. It has lost 6.5 per cent against the greenback since January.

Vietnam's dong lost 3 per cent, its biggest decline since February 2011, as the authorities devalued the currency for the third time this year and also widened its trading band.

India's rupee weakened 3.4 per cent against the US dollar; Taiwan's currency fell 3 per cent, Thailand's baht dropped 2.3 per cent and the Philippine peso declined 2.2 per cent.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 01, 2015, with the headline 'Worst monthly showing by Asian currencies'. Print Edition | Subscribe