Asian currencies tumble to 7-year low amid stock outflows

South Korean won banknotes and coins of various denominations are arranged for a photograph in Seoul.
South Korean won banknotes and coins of various denominations are arranged for a photograph in Seoul.PHOTO: BLOOMBERG

SINGAPORE (BLOOMBERG) - A gauge of Asian currencies reached its weakest level since April 2009 on Tuesday (Nov 15) as the US dollar's strength prompts investors to sell emerging-market assets.

All major Asian currencies have declined against the US dollar since Donald Trump's unexpected win in the US presidential election on Nov 8. Malaysia's ringgit and South Korea's won have lost at least 2.8 per cent each.

The ringgit continued to weaken on Tuesday, losing 0.6 per cent to4.3603 to the US dollar as of 10:54am on Tuesday. Against the Singapore dollar, it was trading at 3.0709, down 0.4 per cent from its Monday's close.

A gauge of the greenback erased its losses this year as US Treasury yields surged on speculation Trump's pro-growth policies will stoke inflation.

"What's driving the weakness in Asian currencies are the higher US bond yields," said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore. "Higher US yields tend to be negative for capital flows in the region. On top of that there's also a general uncertainty about Trump and his administration's foreign policy toward Asia, China in particular."

The Bloomberg-JPMorgan Asia Dollar Index dropped 1.6 per cent since Nov 8, taking this year's loss to 1.9 per cent. The gauge declined 0.1 per cent to 104.29 as of 10:37am in Singapore on Tuesday, after touching the 104.26, the weakest level since 2009.

Funds based overseas have withdrawn in total this month a net US$5.3 billion across six of the region's stock markets, including India, South Korea and Taiwan, exchange data show. They cut their holdings of Thai bonds by US$816 million.

US 10-year yields have risen 36 basis points to 2.21 per cent since the presidential vote. Traders see a 92 per cent chance the Fed will raise interest at its December meeting, up from 76 per cent odds on the Friday before the election, according to data compiled by Bloomberg based on futures.