BLBG:Asian Currencies Decline, led by Korea’s Won, as Greek Debt Crisis Worsens
Asian currencies dropped, led by South Korea’s won, as Europe’s deepening debt crisis heightened risk aversion, damping demand for emerging-market assets.
The MSCI Asia-Pacific Index of regional stocks fell by the most in two weeks after Greek Prime Minister George Papandreou said he will reshuffle his Cabinet and seek a confidence vote today, following the failure of attempts to garner opposition support for an austerity plan. European Union talks on a new bailout package for Greece to prevent the first euro-area default stalled yesterday.
“Investors are concerned about the Greek debt crisis, which doesn’t seem like it’ll be resolved any time soon,” said Han Sung Min, a currency trader at Busan Bank in Seoul. “That’s prompting investors to favor safer assets and dump riskier assets.”
The won slid 0.6 percent to 1,089.10 per dollar as of 11:09 a.m. in Seoul. Indonesia’s rupiah dropped 0.3 percent to 8,574 and Singapore’s dollar slipped 0.3 percent to S$1.2385. Thailand’s baht and Malaysia’s ringgit declined 0.2 percent to 30.59 and 3.0430, respectively
The impasse over the financial aid package for Greece and speculation that a government shakeup would disrupt passage of budget cuts and asset sales sent Greek bonds and the euro plunging yesterday. A report from the Federal Reserve yesterday showed manufacturing in the New York area unexpectedly contracted for the first time in seven months. Global funds sold $835 million more Korean and Taiwanese equities than they bought in the first three days of this week.
Signs of Weakness
“The mounting signs of economic weakness in the U.S. as well as controversies surrounding the Greek bailout will erode risk appetite in Asian currencies,” said Choong Yin Pheng, manager for economic and fixed-income research at Hong Leong Bank Bhd. in Kuala Lumpur. “Investors are opting for safer assets.”
The baht dropped to a three-month low on concern the July 3 elections will spark instability. Army chief Prayuth Chan-ocha, who commanded troops in the 2006 coup that ousted former premier Thaksin Shinawatra, urged voters to pick “good people” in polls and warned criticism of the monarchy wouldn’t be tolerated, according to a video on the website of the military-controlled Channel 7 station.
“Some political instability ahead of the election in Thailand is also starting to weigh on the baht,” said Christopher Gothard , head of foreign exchange at Brown Brothers Harriman (Hong Kong) Ltd.
Elsewhere, the Philippine peso weakened 0.2 percent to 43.46 per dollar. Taiwan’s dollar slipped 0.2 percent to 28.90, China’s yuan dropped 0.02 percent to 6.4837 and the Vietnamese dong was little changed at 20,580.
To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
