Bloomberg News

Korean Won Drops as Recovery Falters; Rupee Advances on Stocks

June 07, 2011

June 7 (Bloomberg) -- South Korea’s won declined on concern regional exports will suffer after weaker U.S. employment and manufacturing data signaled the global recovery is faltering. Other Asian currencies were little changed.

U.S. payrolls grew at the slowest pace in eight months in May and the jobless rate unexpectedly climbed to the highest level this year, Labor Department data on June 3 showed. Currencies in the region erased losses after the MSCI Asia- Pacific Index of shares reversed a decline as the European Union prepares a second bailout for Greece.

“Investors are still cautious,” said Norawit Suparinayok, a foreign-exchange trader at Bangkok Bank Pcl. “If you look at the U.S. economic data it’s not good. If you look at Europe, the sovereign-debt issue still remains.”

The won weakened 0.2 percent to 1,082.05 per dollar at the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was little changed at 118.64 after dropping 0.1 percent earlier.

European Central Bank President Jean-Claude Trichet yesterday indicated his willingness to sanction bond rollovers in Greece. Efforts to resolve Greece’s debt crisis are being complicated by a failure by European regulators to make banks raise enough capital to withstand a default. The “fragilities” of Europe’s banking industry mean a Greek default isn’t an option, European Union Economic and Monetary Affairs Commissioner Olli Rehn said last week.

Indonesian, Korean Rates

Economists are divided over whether Bank of Korea will lift its policy rate when it meets on June 10. Six expect a quarter of a percentage point increase to 3.25 percent, while six predict no change.

India’s rupee advanced 0.2 percent to 44.6863 per dollar. Global funds bought an average $123 million more local stocks than they sold last week, the most since April 21, exchange data show. The ICE Dollar Index fell 0.4 percent.

“The rupee is maintaining a bias for gradual near-term appreciation as stock inflows have improved,” said Sudarshan Bhatt, chief currency trader at Corporation Bank in Mumbai. “The weaker dollar is also supporting gains in the rupee.”

Indonesia’s rupiah was little changed after global funds sold $30 million more Indonesian shares than they bought yesterday. All 11 economists surveyed by Bloomberg expect the central bank to leave its benchmark rate unchanged at 6.75 percent on June 9. The currency held at 8,513 per dollar.

“The higher unemployment rate in the U.S. is causing negative sentiment in the market,” said Mika Martumpal, a currency analyst at PT Bank Commonwealth in Jakarta. “Investors are reducing their positions in higher-yielding assets.”

Elsewhere, Malaysia’s ringgit traded at 3.0075 per dollar versus 3.0085 yesterday. The Philippine peso gained 0.2 percent to 43.15 and the Thai baht was unchanged at 30.29. Singapore’s dollar climbed 0.1 percent to S$1.2293, while China’s yuan was little changed at 6.4810.

--With assistance from Lilian Karunungan in Singapore, Yumi Teso in Bangkok and Seyoon Kim in Seoul. Editors: Andrew Janes, Simon Harvey

%VND %KRW %KRW %USD %SGD %THB %PHP %TWD %IDR %MYR %HKD %CNY

To contact the reporter 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


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