The Wall Street Journal reports, some emerging Asian currencies weakened Friday after Chinese manufacturing data renewed concerns about a slowdown in the country.
The Korean won has led the decline of currencies this year, followed by the Philippine peso and the Malaysian ringgit.
China is South Korea’s biggest trading partner. While the country’s economic prospects look robust — data Thursday showed South Korea’s gross domestic product expanded 2.8% last year, up from a three-year low of 2% in 2012 – the currency has dropped. Friday, the won hit a four-month low of 1,078.6 against the U.S. dollar, and it is down 2.7% this year, data from Thomson Reuters Eikon show.
The Philippine peso extended losses on fears of higher inflation. Earlier this week, it hit its lowest level since August 2010. Friday, the peso was down 2.1% for the year. Waning investor interest has been pushing bond yields in Malaysia higher and dragging the currency down. Yields on 10-year Malaysian bonds hit a multiyear high on Jan. 23, touching 4.25%, the highest since March 2010. On Friday, the notes yielded 4.24%. The ringgit is down 1.65% this year.
Fund outflows from emerging Asia intensified in the seven days to Jan. 22, based on EPFR data, which showed $1.4 billion had been yanked out of equity and bond funds from the region in that period.
“With sentiment towards emerging market assets still poor, we can expect further outflows to come, putting downward pressure on EM currencies,” analysts from ANZ noted on Jan 24.
But signs of improvement in some of the worst hit countries like India and Indonesia are luring investors back in.
“Intriguingly, it [India] is the only Asian market that has performed since the Fed has officially announced in December it was reducing its bond purchases. Clearly, the first decisions made by the new RBI [Reserve Bank of India] Governor Mr. Rajan, aiming at reducing the volatility of the rupee have worked out well analysts said.
