BLBG:Asian Currencies Slide to 2011 Low, Led by Won, on Global Growth Concerns
Asian currencies dropped, led by plunges in the South Korean won and Taiwan’s dollar, after the Federal Reserve said there are “significant downside risks” to the U.S. economy, hurting the region’s export outlook.
The Bloomberg-JPMorgan Asia Dollar Index fell to the lowest level this year and the MSCI Asia-Pacific Index of shares tumbled the most in six months. Data today showed Thai export growth slowed in August and indicated China’s manufacturing will shrink for a third month in September. Moody’s Investors Service cut its ratings on Bank of America Corp., Citigroup Inc. and Wells Fargo & Co., saying the U.S. is “more likely” to allow a large bank to fail than it was during the financial crisis.
The Asia Dollar Index, which tracks the region’s 10 most- traded currencies excluding the yen, declined 1 percent to 114.87 as of 4:50 p.m. in Hong Kong. The won slumped 2.6 percent to 1,179.85 per dollar, Taiwan’s dollar weakened 1.4 percent to NT$30.372 and India’s rupee dropped 1.5 percent to 49.06, according to data compiled by Bloomberg.
“Investors are trimming their portfolios and selling their holdings of emerging-market assets in Asia on risk aversion,” said Shigehisa Shiroki, chief trader on the Asian and emerging- markets team at Mizuho Corporate Bank Ltd. in Tokyo. “Asia can’t avoid a slowdown in exports due to the conditions in the U.S. and Europe. The downgrade of U.S. banks’ credit ratings is worsening sentiment.”
The Fed said yesterday it will replace $400 billion of short-term debt in its portfolio with longer-term Treasuries to reduce borrowing costs and counter the rising risk of another recession.
Offshore Yuan
The International Monetary Fund lowered its forecast for 2011 global economic growth to 4 percent from 4.3 percent this week, and that for 2012 to 4 percent from 4.5 percent, predicting a “severe” fallout if Europe fails to contain its debt crisis. Global funds sold $3 billion more Taiwanese, South Korean and Indonesia equities than they bought this month through yesterday, exchange data show.
China’s yuan weakened the most on record in Hong Kong, sliding to the biggest discount to the onshore exchange rate since the currency began trading in the city last year.
The yuan sank 0.9 percent to 6.4440 per dollar, a 0.9 percent discount to the rate in Shanghai. The currency fell 0.10 percent to 6.3884 in the domestic market, according to the China Foreign Exchange Trade System.
“It’s a textbook example of funds leaving Asia and buying the dollar on risk-off mode,” said Carlos Cheung, a Hong Kong- based foreign-exchange dealer at Bank of Communications Ltd. “Market expectations on yuan appreciation have dwindled.”
Sustained Downturn
The won fell to a one-year low as overseas investors pulled money from Korean stocks, adding to net sales of $918 million this month through yesterday. The potential outflow of foreign capital from South Korea is a major concern, Financial Services Commission Chairman Kim Seok Dong said today in a CBS radio interview. The current global economic difficulties will likely drag on for “quite a long” period, Kim said.
“The Fed’s emphasis on economic downside risks raised fear among investors, boosting dollar demand” said Yun Se Min, a Seoul-based currency dealer at Busan Bank. “There was speculation the government intervened to prevent the won from weakening below the 1,180 per dollar level.”
Indonesia’s rupiah gained 0.6 percent to 9,023 against the dollar, reversing earlier losses of as much as 3.1 percent as the central bank intervened.
Bank Indonesia will remain in the market to boost confidence, Hendar, the central bank’s director of monetary policy, said in Jakarta today. The decline will be temporary and the central bank will keep the rupiah’s movement in line with regional currencies, he said.
China Demand
Taiwan’s dollar slid to this year’s low on concern slowing global growth will weaken demand for the island’s exports. China’s preliminary index of purchasing managers fell to 49.4 in September after final readings of 49.9 for August and 49.3 for July, according to HSBC Holdings Plc and Markit Economics. China is the No. 1 export market for Taiwan and South Korea.
Elsewhere, the Philippine peso declined 0.6 percent to 43.772 per dollar, Malaysia’s ringgit slumped 0.5 percent to 3.1575 and Thailand’s baht dropped 0.8 percent to 30.71.
To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
