Asian currencies had their biggest monthly decline in a year as investors pulled money from regional assets after the Federal Reserve said it could taper its stimulus if the US economy shows sustained improvement.
The Bloomberg-JPMorgan Asia Dollar Index dropped by the most since May 2012 as US consumer confidence rose to a five-year high. Foreign funds were net sellers of stocks in Indonesia, Taiwan, Thailand and the Philippines this week after a report indicated Chinese manufacturing shrank in May. Global investors pulled $224 million from emerging-market bond funds in the week through May 29, Morgan Stanley said in a report, citing data published by EPFR Global.
"The Fed could actually tighten as the recovery in the US is looking good and sustainable," said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. "The sentiment is shifting in favor of the dollar and local bonds got sold off."
India's rupee slumped 4.8 per cent to 56.5050 per dollar from April 30, touching an 11-month low yesterday, according to data compiled by Bloomberg. Thailand's baht fell 3.2 per cent to 30.31 and the Philippine peso declined 2.6 per cent to 42.263, reaching an 11-month low on May 30. The Asia Dollar Index dropped 1.3 per cent to 116.78.
The MSCI Asia Pacific Index of shares has lost 5.8 per cent since May 22, the day Fed Chairman Ben S. Bernanke said the monetary authority could reduce its $85 billion a month of bond buying. The weekly outflow from emerging-market debt funds was the first in almost a year, the EPFR Global data shows.
Asian policy makers made efforts to shore up growth in May, with South Korea and Thailand cutting their benchmark interest rates by 25 basis points to 2.5 per cent. Taiwan's government announced stimulus measures to boost domestic demand to counter a slowdown in exports.
The rupee declined the most since May 2012 after central bank Governor Duvvuri Subbarao said retail inflation was still high and the nation's balance of payments is under stress. The economy grew 4.8 per cent in the first quarter, the government said yesterday, matching the median forecast in a Bloomberg survey.
The baht slumped for a sixth straight week on concern policy makers will stem inflows. Finance Minister Kittiratt Na-Ranong said May 29 that an amended regulation will allow the central bank to set conditions or collect fees on money coming in or out of the country.
Thai Measures
Overseas investors sold $801 million more Thai government debt than they bought in May after pumping a net $12 billion into the securities in the first four months of this year, Thai Bond Market Association data show.
"I am sure the Thai government is very cautious on whether or not to use the measures," said Tsutomu Soma, manager of Rakuten Securities Inc.'s fixed-income business unit in Tokyo. "If it's introduced, it will hurt investor sentiment for Thailand a lot."
Elsewhere, South Korea's won fell 2.5 per cent to 1,129.64 per dollar in May, data compiled by Bloomberg show. Malaysia's ringgit depreciated 1.7 per cent to 3.0952, Taiwan's dollar declined 1.5 per cent to NT$30.06 and Indonesia's rupiah dropped 0.7 per cent to 9,795. China's yuan rose for a third month, strengthening 0.5 per cent to 6.1345 and touching a 19-year high of 6.1210 on May 27.
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