BLBG:Asian Currencies Weaken Most Since September On Europe, China
Asian currencies were poised for the biggest monthly loss since September as China’s economy slowed and a banking crisis in Spain curbed appetite for emerging- market assets.
The Bloomberg-JPMorgan Asia Dollar Index lost 2.7 percent since April 30 as global funds pulled $7.8 billion from South Korean, Taiwanese and Indonesian stocks, exchange data show. India’s rupee led losses, reaching a record low, while Indonesia’s rupiah fell to the weakest level since November 2009. China’s yuan and Malaysia’s ringgit touched their lowest levels this year.
“The Europe problem is not going away anytime soon given the extent of demand for safe-haven assets,” said Roy Teo, a currency strategist in Singapore at ABN Amro Private Bank. “There’s added pressure for policy reaction given the market capitulation.”
The rupee fell 6.2 percent this month to 56.2325 per dollar at yesterday’s close in Mumbai and touched 56.3875 on May 24, according to data compiled by Bloomberg. The ringgit declined 4.8 percent to 3.1778 per dollar as of 9:41 a.m. in Kuala Lumpur. The won fell 4.3 percent to 1,181.50 and the rupiah fell 3.9 percent to 9,565.
Global stocks slumped yesterday after Italy failed to meet its maximum target at a debt sale, costs to protect Spanish government bonds with default swaps climbed to an all-time high and a Greek poll showed support for anti-austerity parties before an election on June 17. Foreign funds pulled $4.9 billion from emerging stock markets this month through May 23, according to EPFR Global.
Credit Downgrades
South Korea’s Kospi Index of shares was set for a third monthly drop as the euro sank to a two-year low.
“Won moves will follow the euro and stock market declines on Europe’s debt crisis,” said Cho Hyun Seok, a Seoul-based currency trader at Standard Chartered Bank Korea. “We’re not seeing much selling of dollars by South Korean exporters repatriating income even though it’s the end of the month.”
The Asia Dollar Index reached 113.80 yesterday, the lowest since September 2010. Its 60-day volatility rose to 2.82 percent from a two-year low of 2.68 percent on May 7. Fitch Ratings cut Greece’s creditworthiness earlier this month, while Moody’s Investors Service downgraded 16 Spanish banks and 26 Italian lenders.
The yuan weakened 0.9 percent in May to 6.3652 per dollar in Shanghai, according to the China Foreign Exchange Trade System, poised for its worst month in at least five years. The central bank fixed the daily reference rate 0.09 percent weaker at 6.3355 today, or 0.9 percent lower than on April 30.
Asian Intervention
An official report tomorrow may show growth in Chinese manufacturing slowed in May based on a survey of purchasing managers, according to a Bloomberg News survey. A similar gauge published by HSBC Holdings and Markit Economics on May 24 suggested it contracted for a seventh month.
Asian central banks are joining their global emerging- market counterparts in intervening in the foreign-exchange markets, as losses threaten to stoke inflation. Bank Indonesia said on May 29 it will start offering dollar term deposits in two weeks to stabilize the rupiah while the Reserve Bank of India has sold a net $20.1 billion from its reserves in the seven months through March to arrest the rupee’s slide.
Brazil auctioned currency swaps for four straight days last week to support the real after it fell to a three-year low, while South Korea, India and Russia are also acting to curb exchange-rate losses.
“Inflation is still an issue for a number of emerging- market countries,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. “At the same time, growth is an increasing concern for those countries vulnerable to the European debt crisis. Policy makers have to try and strike a very careful balance.”
Elsewhere, Thailand’s baht fell 3.6 percent this month to 31.91 per dollar. Taiwan’s dollar weakened 2 percent to NT$29.83, the Philippine peso dropped 3.4 percent to 43.69 and Vietnam’s dong strengthened 0.2 percent to 20,840.
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net;
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.
