BLBG:Asian Currencies Fall Most Since November As Europe Risks Mount
Asian currencies were headed for the biggest weekly drop since November as concern Europe’s debt crisis will worsen spurred demand for dollars amid signs the U.S. and Chinese economies are losing momentum.
The Bloomberg-JPMorgan Asia Dollar Index fell 0.9 percent this week as global funds pulled about $1.5 billion from stocks in South Korea and Taiwan. The won and Malaysia’s ringgit were poised for their biggest drops since September, while India’s rupee sank to an all-time low. Greece’s credit rating was cut by Fitch Ratings yesterday on concern the country will leave the euro, while Moody’s Investors Service downgraded 16 Spanish banks and 26 Italian lenders this week.
The won fell 2.4 percent from its May 11 close to 1,174.05 per dollar as of 11:46 a.m. in Seoul, according to data compiled by Bloomberg. The ringgit dropped 2 percent to 3.1345. The rupee slid 1.6 percent to 54.485 and Indonesia’s rupiah weakened 1.3 percent to 9,360.
“Investors are taking money out from riskier assets given the lingering concerns about Europe’s debt problem and the economic recovery outlook,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team in Tokyo at Mizuho Corporate Bank. “It’s a double-whammy for Asian currencies as many countries depend on exports for growth.”
U.S. reports yesterday showed an unexpected contraction in manufacturing and consumer confidence is the lowest in almost four months. Home prices in China fell in a record 46 of 70 cities tracked by the government in April from a year earlier, according to data released today. Greece is holding an election on June 17 after political leaders, split over austerity measures needed to secure a European Union-led bailout, failed to form a coalition in the wake of a May 6 poll.
Intervention Risk
The MSCI Asia Pacific Index (MXAP) of stocks erased all of its 2012 gain this week as more than $2 trillion of global stock market value was erased. Policy makers in some parts of the region indicated they are prepared to intervene to support their currencies.
South Korea is monitoring capital flows and will take steps to stabilize markets if needed, according to a joint statement from the finance ministry, central bank and the financial- markets regulator yesterday.
“There’s little willingness in the market to sell the dollar as Greek issues dominate,” said Kim Seong Soo, a currency trader at Kyongnam Bank in Seoul. There are no signs of significant intervention to stem the won’s slide, he said.
China Slowdown
The Reserve Bank of India and Bank Indonesia have said they will buy their currencies to counter depreciation, while Bank Negara Malaysia said the country can weather any setbacks arising from Europe’s debt crisis.
The yuan weakened 0.25 percent this week to 6.3262 per dollar in Shanghai, near to an eight-week low of 6.3280 reached May 16, according to China Foreign Exchange Trade System. The People’s Bank of China lowered its reference rate 0.41 percent to 6.3209, the biggest weekly decline since August 2010.
The central bank in Asia’s biggest economy cut lenders’ reserve requirements today for the third time in six months to support the economy, which expanded in the first quarter at the slowest pace since mid-2009. Goldman Sachs Group Inc. cut its forecast for second-quarter growth to 7.9 percent from 8.5 percent, according to a research note published today. The bank cut its 2012 projection to 8.1 percent from 8.6 percent.
Thailand’s baht dropped 0.7 percent this week to 31.42 per dollar in Bangkok. A government report on May 21 may show the economy shrank 0.9 percent in the first quarter, according to the median estimate in a Bloomberg News survey of economists. Gross domestic product slumped 9 percent in the final three months of 2011 as the worst floods in almost 70 years damaged factories and crops.
Elsewhere, the Philippine peso depreciated 1.3 percent to 43.14 per dollar, Taiwan’s dollar lost 0.7 percent to NT$29.619 and Vietnam’s dong dropped 0.1 percent to 20,850.
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net.
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.
