After a period of relative calm in October, many Asian currencies have again come under pressure in the past couple of weeks. The sell-off follows renewed speculation that the Fed might start to taper its asset purchase programme before the end of the year. As was the case during the summer, it was the currencies of countries with large current account deficits (the Indonesian rupiah, the Indian rupee, and the Aussie and Kiwi dollars), which saw the biggest falls. In contrast, the currencies of Korea and Taiwan, both of which run large current account surpluses, were little changed against the US dollar. When the Fed does eventually start to taper, we would expect to see a similar pattern emerge, with the rupiah and rupee the first in the firing line.
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