Asian currencies weakened as a lack of progress in resolving Europe’s debt crisis added to concern global economic growth is slowing, prompting investors to cut holdings of emerging-market assets.
The won slipped from a one-month high and Thailand’s baht fell the most in four weeks after a rift emerged between France and Germany over how to enhance a bailout fund. European Union leaders will hold a summit on Oct. 23 to discuss solutions to the crisis. The MSCI Asia-Pacific Index of stocks dropped 1.5 percent after the Federal Reserve said U.S. companies were becoming more pessimistic about the economic outlook.
“Expectations for positive news on Europe’s debt crisis have subsided a little,” said Kim Seong Soo, a Seoul-based currency dealer with Kyongnam Bank. “Investors will be adopting a cautious stance ahead of the European summit this week.”
The baht weakened 0.8 percent to 30.94 per dollar as of 10:20 a.m. in Bangkok, according to data compiled by Bloomberg. The won fell 0.8 percent to 1,141.53, Malaysia’s ringgit lost 0.7 percent to 3.1295 and Taiwan’s dollar declined 0.6 percent to NT$30.270.
French Finance Minister Francois Baroin said yesterday that Europe’s temporary bailout fund would be best enhanced with help from the European Central Bank, a position the ECB and Germany continue to oppose. German Chancellor Angela Merkel said yesterday the summit on Oct. 23 will not be “the end point” of the crisis.
Thai Floods
The Federal Reserve said the world’s biggest economy maintained its expansion last month, while companies reported more doubt about the strength of the recovery, according to the Beige Book survey released in Washington yesterday. Contacts generally noted weaker or less certain outlooks for business conditions, the survey showed.
The baht touched a one-week low after the Bank of Thailand left the benchmark one-day bond repurchase rate unchanged at 3.50 percent yesterday and warned that the worst floods in five decades will crimp economic growth.
“The floods will hurt tourism, production, distribution and supply chains and reduce exports, hurting the baht,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd.
The Taiwan dollar dropped by the most in more than three weeks before a government report today that may show overseas shipments grew at the slowest pace in two years. Export orders rose 3.46 percent last month, the least since September 2009, according to the median forecast in a Bloomberg News survey.
‘Weaker Economic Outlook’
“Traders don’t dare take overnight positions as they’re still skeptical whether Europe will find a solution to solve the crisis,” said Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB.
The Philippine peso declined 0.2 percent to 43.248 per dollar before a rate decision today at which all 17 economists polled by Bloomberg forecast the central bank will keep borrowing costs unchanged at 4.50 percent.
Elsewhere, China’s yuan weakened 0.03 percent to 6.3791 per dollar, according to the China Foreign Exchange Trade System. Indonesia’s rupiah slipped 0.4 percent to 8,840.
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net; Jiyeun Lee in Seoul at jlee1029@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.
