Bloomberg News

Asia Currencies Halt Three-Week Rally on Slower Economic Growth

June 10, 2011

June 11 (Bloomberg) -- Asian currencies halted a three-week rally as signs the world’s biggest economy is slowing tempered demand for emerging-market assets and raised concern about the outlook for exports.

Federal Reserve Chairman Ben S. Bernanke said this week the U.S. economic recovery was “frustratingly slow” and offered no hints on a new stimulus program. The Fed has pumped cash into the banking system and kept interest rates near zero, prompting investors to search for higher yields in developing markets. The Bloomberg-JPMorgan Asia Dollar Index dropped 0.4 percent this week as overseas investors were net sellers of $1.6 billion of equities in Thailand, South Korea and Taiwan.

“On balance, the global economic data has been on the weaker side as reflected in manufacturing indicators,” said Choong Yin Pheng, manager for economic and fixed-income research at Hong Leong Bank Bhd. in Kuala Lumpur. “The risk has tilted to growth and Asian currencies will be affected in a risk-averse environment.”

The South Korean won fell 0.2 percent this week to 1,082.65 per dollar as of 3 p.m. yesterday in Seoul, according to data compiled by Bloomberg. Taiwan’s dollar dropped 0.3 percent to NT$28.835, Thailand’s baht lost 0.2 percent to 30.40 and Malaysia’s ringgit weakened 0.3 percent to 3.0210. The Philippine peso declined 0.2 percent to 43.302 per dollar.

The MSCI Asia-Pacific Index of regional stocks posted a sixth weekly loss after a June 3 government report showed U.S. employers hired the least workers in May in eight months. China’s customs bureau reported yesterday a $13.1 billion trade surplus for May, compared with the median forecast in a Bloomberg survey of $19.3 billion, as export growth slowed to 19 percent from 30 percent.

‘Risk Aversion’

Global funds sold $672 million more Thai equities than they bought this month, exchange data showed. Risk aversion and concerns about the nation’s political scene have triggered fund outflows, Bank of Thailand Governor Prasarn Trairatvorakul said June 9. The country will hold national elections on July 3.

“Amid risk aversion caused by concern about the U.S. recovery and uncertainty surrounding the Thai polls, foreign investors have been selling local stocks,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp. in Bangkok. “That is putting downward pressure on the baht.”

South Korea’s central bank Governor Kim Choong Soo boosted the benchmark seven-day repurchase rate to 3.25 percent from 3 percent yesterday, the third increase this year. Eight of 17 economists surveyed by Bloomberg News predicted the decision, with the rest having forecast no change.

Monetary Tightening

Borrowing costs in Malaysia will rise at least another 25 basis points, or 0.25 percentage point, by the end of the year, according to the median estimate of 13 economists surveyed by Bloomberg. Malaysia’s central bank raised the overnight policy rate to 3 percent on May 5.

“The ringgit will likely remain firm and may rise beyond 3 against the dollar as expectations of a domestic rate hike are still there,” said Zulkiflee Nidzam, head of foreign-exchange trading in Kuala Lumpur at Asian Finance Bank Bhd.

Elsewhere this week, Indonesia’s rupiah was little changed at 8,523. Singapore’s dollar gained 0.2 percent to S$1.2316 and India’s rupee climbed 0.2 percent to 44.7225. China’s yuan was little changed at 6.4802.

--With assistance from David Yong in Singapore, Elffie Chew in Kuala Lumpur and Yumi Teso in Bangkok. Editor: Sandy Hendry, Andrew Janes

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

To contact the reporter on this story: Khalid Qayum in Singapore at kqayum@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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