Asia Currencies Slide After Fed Officials Signal Rate Increase Possible in 2015
Most Asian currencies weakened on Tuesday after comments by U.S. Federal Reserve speakers suggested the central bank could raise interest rates as early as next month, while shares made modest gains ahead of a reading on Chinese manufacturing.
The Malaysian ringgit fell by 0.5% against the U.S. dollar while the Thai baht and Indonesian rupiah each fell by about 0.3%.
The broad losses in currencies came after the dollar rose overnight to its levels before the Fed’s decision last week to leave interest rates unchanged.
Remarks from regional Fed presidents Jeffrey Lacker of Richmond, Va., James Bullard of St. Louis and John Williams of San Francisco signaled that many central-bank objectives had been met and that Thursday’s on-hold decision was a close call.
The Wall Street Journal Dollar Index, which compares the dollar against a basket of 16 currencies, rose to 88.49, the highest level since Sept. 10. It was last at 88.36.
“The reinstatement of long positions in the U.S. dollar is helping calm Asian stock markets [and] easing Asian currencies,” said Evan Lucas, a strategist at brokerage IG.
Stock trading in the region has been relatively muted this week with Japanese markets shut for a national holiday until Thursday. “It makes things more cautious in terms of trading,” Mr. Lucas said.
Investors are looking to a reading on Chinese manufacturing activity for September due Wednesday from Caixin Media Co. and research firm Markit Ltd. The August reading was the lowest in more than six years.
In the latest sign of headwinds hitting the Chinese economy, U.S. credit-rating firmStandard & Poor’s Ratings Services said China’s banks face growing risk tied to rising bad loans and problems in its real-estate sector. S&P on Monday said it revised its assessment of the economic risks facing China’s banking industry to negative from stable. The industry is one of Beijing’s major levers as it tries to lift the world’s second-largest economy out of its growth slowdown.
On Tuesday, the Shanghai Composite Index gained 0.7% as of the midday session, ahead of President Xi Jinping’s first state visit to the U.S. The benchmark jumped nearly 2% Monday, with gains coming late in the day, a frequent buying-window for Beijing-backed funds to support the market.
Elsewhere, the Hang Seng Index was up 0.7% and South Korea’s Kospi gained 0.3%.
The S&P/ASX 200 was up 0.5%, bouncing from its sharpest loss in more than a week. The Australian benchmark lost 2% on Monday amid anxiety about the pace of global growth.
Australia’s mining and energy shares have been dented by global-growth worries at a time when several of the country’s biggest commodity exports have excess supplies. Banking stocks have also sold off amid worries about the local economy, which some analysts say may be headed for a recession.
Shares in Australia are trading near their lowest levels since 2013 after a selloff in China dragged down Asia-Pacific markets last month. The S&P/ASX 200 bottomed out at 5001.28 in late August and is currently off 14% from its April peak.
But on Tuesday, shares across the board gained in Australia, with energy stocks standing out after oil prices bounced back overnight. Light, sweet crude for October delivery settled up $2, or 4.5%, at $46.68 a barrel, on expectations that a drop in U.S. production would help shrink the domestic glut of crude.
“Yesterday’s move was a big overreaction,” said IG’s Mr. Lucas, explaining that volume in Australia’s stock market was 30% below the 30-day average. “You can’t take yesterday at face value,” he said, adding, “you’re seeing a bit of correction” today.
Brent oil was last down 0.7% at $48.57 a barrel from its level late Monday in Asia.
U.S. stocks finished higher overnight but biotechnology shares tumbled after Hillary Clinton tweeted about how she will outline a plan on Tuesday to take on “price gouging” by certain specialty drug makers.
Gold was flat at $1133.40 a troy ounce.
Source: ASX – Asia Currencies Slide After Fed Officials Signal Rate Increase Possible in 2015
