A gauge of dollar strength climbed 1.2 percent this week after a March 6 report showed the U.S. unemployment rate is the lowest it’s been in almost seven years. While monetary policy is set to tighten in the world’s largest economy, central banks across most of Asia are loosening, with South Korea and Thailand having both lowered borrowing costs this week.
“It wasn’t an ideal week for Asian currencies,” said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. in Singapore. The Fed “could take another step towards hiking interest rates at the March 18 policy meeting,” he said.
The won slumped 2.7 percent this week, its biggest loss since 2011, prices compiled by Bloomberg show. The rupiah fell 1.7 percent, the most in seven months, and Malaysia’s ringgit dropped 1 percent. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, slid this week to its lowest level since July 2010.
The won sank to a 20-month low on Thursday as the Bank of Korea unexpectedly cut its seven-day repurchase rate to a record 1.75 percent. Governor Lee Ju Yeol said policy makers had “decided to act preemptively” after inflation slowed to the least since 1999 in February and exports fell the most in two years.
Thailand’s baht declined 0.8 percent this week, it biggest drop in five months. The Bank of Thailand lowered benchmark borrowing costs on Wednesday for the first time in a year, joining a global wave of monetary easing after the Southeast Asian economy grew at its slowest pace in three years.
In Indonesia, the rupiah slid on Wednesday to its lowest level since 1998 after the central bank signaled that it will tolerate further currency weakness. Strategists at HSBC Holdings Plc and Credit Suisse Group AG cut their rupiah forecasts after Bank Indonesia Senior Deputy Governor Mirza Adityaswara said March 6 the authority sees an undervalued currency being helpful for exports.
The offshore yuan traded in Hong Kong strengthened 0.2 percent this week as comments by Chinese leaders attending an annual meeting of the nation’s legislature quelled speculation that depreciation would be used to support the economy. The currency is stable compared with peers and its moves are normal, People’s Bank of China Governor Zhou Xiaochuan said Thursday. Premier Li Keqiang last week pledged to keep the yuan at a reasonable level as its usage is promoted overseas.