There is much speculation in the financial market that the Federal Reserve might be increasing the interest rates further than expected. This speculation was followed by the biggest weekly decline of Asian currencies since April this year.
The speculations were the result of improving economic data in the US such as the US job openings which recorded a 13-year high.
If the US economy is seen to be improving, there is a higher chance that the Fed will be raising its rates. If it does, investors will shift their holdings from the emerging markets back to the United States. The US dollar is still considered to be a safe haven currency compared to its peers. An improving labor market signals a good economic scenario and therefore, people who have currency holdings in Asia have sold currencies in exchange for the US dollar.
The US Central bank is currently holding its rate at 0.25 percent to encourage economic flow.
In Asia, Philippines recently hiked interest rates by 25 bps and the Peso fell at the market close of 43.915. Indonesian Rupiah and Malaysian Ringgit both fell 0.50 percent to 11818 and 3.1972 respectively. Thailand Baht dropped its biggest for more than a month following a USD 49 million fund pull-out from foreign holdings.
Vietnamese Dong remained slightly unchanged and the Taiwan NT dropped a mere 0.2 percent.
Chinese Yuan on the other had strengthened as they raised the currency's daily fixing in almost four years. Premier Li said that the Chinese government will ensure a medium to high growth rate by implementing policy changes that will promote and attract new businesses as well as foreign investment. The Yuan was seen at 6.1346, up 0.11 percent against the dollar.
Other countries that were hit with the rising US interest speculation are Canada and Australia. The Canadian dollar was seen to a five-month low at CAD 1.103 and the Aussie Dollar at a six-month low of AUD 9053.
Commodity prices were also seen to take a hit as gold dropped to an eight-month low of USD 1231 per ounce and copper at a three-month low. Brent crude also fell by 22 cents at USD 97.86 per barrel.
