BLBG:Asian Currencies Weaken as Europe Debt Crisis Concern Deters Risk-Taking
Asian currencies weakened, led by the Philippine peso and Thailand’s baht, as concern Europe’s debt crisis will worsen damped demand for emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index (ADXY) fell for a second day after UniCredit SpA, Italy’s biggest bank, said it will sell shares at a 43 percent discount to the Jan. 3 closing price to raise capital. Greek Prime Minister Lucas Papademos said yesterday the economy could collapse as early as March if the country doesn’t accept income cuts needed to secure more international aid. The MSCI Asia Pacific (MXAP) Index of shares lost 0.7 percent. India’s rupee and Indonesia’s rupiah gained.
“Europe’s debt concern reverses the risk-on mood and makes the dollar stronger,” said Norawit Suparinayok, a foreign- exchange trader at Bangkok Bank Pcl. “Asian currencies may be weaker against the dollar.”
The peso dropped 0.5 percent to 43.982 per dollar as of 5:27 p.m. in Manila, according to Tullett Prebon Plc. Thailand’s baht weakened 0.4 percent to 31.62, while Malaysia’s ringgit declined 0.3 percent to 3.1475.
France plans to sell as much as 8 billion euros ($10.3 billion) of debt today as credit-rating companies threaten to cut the nation’s AAA rating. Fitch Ratings cut the country’s credit outlook on Dec. 16 on the “heightened risk of contingent liabilities” from the euro-region crisis. Standard & Poor’s placed the ratings of 15 euro nations, including France and Germany, on review for possible downgrades on Dec. 5.
Yuan Reference Rate
The yuan dropped after the central bank lowered its daily reference rate by the most since November amid concern the European debt crisis will cool demand for Chinese goods.
The People’s Bank of China set the fixing 0.18 percent weaker, the biggest reduction since Nov. 15, at 6.3115 per dollar. Global economic growth prospects are dim and downside risks are escalating, Zhu Min, deputy managing director at the International Monetary Fund, said in Singapore today.
“The lingering European debt crisis will harm China’s exports and the central bank is taking account of this,” said Kenix Lai, a Hong Kong-based currency analyst at Bank of East Asia Ltd.
The yuan fell 0.1 percent to 6.3017. The currency is allowed to trade 0.5 percent on either side of the daily fixing.
Rupee Rises
The rupee gained for a third day on speculation the central bank will cut interest rates to support a slowing domestic economy, attracting capital inflows. The currency appreciated 0.2 percent to 52.8550.
Overseas investors boosted holdings of Indian shares by $54 million in the first two days of this week, exchange data show. Reserve Bank of India Deputy Governor Subir Gokarn said today that the nation’s current cycle of monetary tightening has “peaked.” The bank boosted interest rates 13 times in the last two years to curb inflation. India’s factory output shrank 5.1 percent in October from a year earlier, government data showed last month.
“There are expectations of inflows,” said Naveen Raghuvanshi, a trader at Development Credit Bank in Mumbai. “But developments in Europe will also drive the currency.”
The rupiah reversed earlier losses of as much as 0.7 percent and gained 0.2 percent to 9,115. South Korea’s won slid 0.3 percent to 1,152.56 and the Singapore dollar fell 0.4 percent to S$1.2927. The Taiwan dollar gained 0.1 percent NT$30.266.
To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net Yumi Teso in Bangkok at yteso1@bloomberg.net
To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net
