By Lilian Karunungan Dec. 7 (Bloomberg) -- Asian currencies dropped against the greenback, led by India’s rupee and the Singapore dollar, as better-than-forecast U.S. employment data spurred bets the Federal Reserve will raise interest rates next year. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, reached a 14-month high last week after investors took advantage of near- zero U.S. rates to fund investment in higher-yielding assets. A U.S. Labor Department report last week showed the jobless rate in the world’s largest economy unexpectedly declined last month. “Asian currencies had a knee-jerk reaction to the non-farm payrolls,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte. “Where previously there have been aggressive dollar carry trades, now that’s been pulled back a bit.” India’s rupee fell 0.6 percent to 46.59 per dollar as of 2:33 p.m. in Mumbai, according to data compiled by Bloomberg. The Singapore dollar dropped 0.7 percent to S$1.3913 and the Malaysian ringgit declined 0.5 percent to 3.3975. The Asia Dollar Index retreated 0.2 percent to 110.86. It reached 111.41 on Dec. 3, the strongest level since September 2008. U.S. employers eliminated 11,000 jobs in November, the fewest since a recession began, the Labor Department reported Dec. 4. The median forecast of 82 economists in a Bloomberg survey was for a reduction of 125,000 workers. The jobless rate slipped to 10 percent from 10.2 percent. Rate-Increase Bets Federal-funds futures contracts on the Chicago Board of Trade show a 16 percent probability the Fed will increase the target rate to at least 0.5 percent by March, up from 8.3 percent odds a week ago. Indonesia’s benchmark interest rate is the highest among Asia’s major economies at 6.5 percent, compared with the Federal Reserve’s target of zero to 0.25 percent. Malaysia’s overnight policy rate is 2 percent and the Korean central bank’s seven-day repurchase rate is 2 percent. The Indonesian currency weakened, snapping five days of gains, as the Jakarta Composite index of shares dropped 1.1 percent. The won pared losses after falling as much as 0.6 percent today, as Korean stocks rallied and Chosun Ilbo newspaper cited Finance Minister Yoon Jeung Hyun as saying the won’s appreciation this year has not been too fast. “We had a strong payrolls report, and people moved their expectations of a rate hike by the Fed forward,” said Mirza Baig, a currency strategist in Singapore at Deutsche Bank AG. “That’s supporting the dollar.” Asian currencies will rebound as “it didn’t really hurt equity sentiment,” he said. Stock Gains Korea’s Kospi index added 0.5 percent, after climbing 6.6 percent last week, as foreign investors bought more local shares than they sold for a sixth day. The Bank of Korea will announce its monthly decision on interest rates on Dec. 10. Governor Lee Seong Tae said on Nov. 12 the bank will maintain an accommodative policy stance for the time being with an emphasis on sustaining economic activity. The Philippine peso dropped for the first time in five days, weakening 0.2 percent to 46.09 per dollar, after President Gloria Arroyo declared military rule in Maguindanao province, where 57 people were killed last month in the nation’s worst election-related violence on record. The province’s governor and several relatives were arrested for allegedly plotting a rebellion as the government took steps to charge and prosecute them over the deaths. Elsewhere in Asian trading, the rupiah slid as much as 0.6 percent before trading 0.3 percent lower at 9,443, according to data compiled by Bloomberg. The Thai baht was little changed at 33.13. To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.

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