Currencies in emerging Asia slid further today after traders took mixed messages on the US Federal Reserve’s stimulus programme, even as upbeat Chinese manufacturing data provided support.
The Indian rupee sank to a new record low of 65.27 to the dollar before slightly recovering to 65.15 in afternoon Asian trade, still well down on the 64.72 late yesterday.
The Indonesian rupiah traded at 10,958 to the dollar against 10,945 a day earlier, while the Thai baht was at 32.12, compared with 31.77.
Minutes from the Fed’s July policy meeting showed board members had differing opinions on when to wind down its USD 85 billion a month bond-buying, known as quantitative easing (QE).
Some back a “taper” as soon as next month, while others said the bank needed to see more evidence the US economy was strong enough.
Fed boss Ben Bernanke has said it will not reel in the scheme until the economy can stand on its own two feet and unemployment is below seven per cent.
In Tokyo today, the dollar rose to 98.21 yen from 97.67 yen in New York late yesterday, while the euro bought USD 1.3340 from USD 1.3359. The single currency fetched 131.02 yen, against 130.46 yen.
“I personally didn’t think the minutes gave any clear indication of whether tapering will begin next month or not, but the market reacted anyway with falls in shares, rise in yields and dollar-buying,” said Kengo Suzuki, currency strategist at Mizuho Securities.
Expectations of an end to QE have seen foreigners in recent months repatriate some of the vast sums that poured into emerging economies when it was unveiled in September 2012, in turn hitting currencies and equities.
However, Marito Ueda, a top currency trader at FX Prime said: “Its massive pressure on emerging market currencies ... is falling off slightly, as China’s PMI (purchasing managers index) was better than expected.”
Banking giant HSBC said preliminary readings show its PMI for China rose to 50.1 in August, compared with a final reading of 47.7 in July.
A reading above 50 indicates expansion from the previous month, while a reading below 50 indicates contraction.
The data — the first to indicate growth in four months — come after recent figures showing a pick-up in Chinese trade and tentatively suggest the under—pressure economy may be about to turn a corner.