June 15 (Bloomberg) -- Asian currencies declined, erasing earlier gains, as concern over Greece’s debt crisis outweighed signs the global recovery is intact, heightening risk aversion.
The MSCI Asia-Pacific Index of shares fell after an emergency session of European finance ministers failed to agree to a German-led push for bondholders to shoulder part of the cost of a new Greek aid package in Brussels late yesterday. The European Central Bank, backed by France, warned the move might constitute the euro area’s first sovereign default. Currencies climbed earlier after data showed Chinese factory output rose and U.S. retail sales were better than economists had expected.
Indonesia’s rupiah weakened 0.1 percent to 8,546 per dollar as of 3:35 p.m. in Jakarta, according to data compiled by Bloomberg. Thailand’s baht, the Philippine peso and Malaysia’s ringgit declined 0.1 percent to 30.48, 43.39 and 3.0325, respectively.
“It’s a bad sign that finance ministers were unable to come up with even a slight conclusion and when you look at Europe the amount of risk stays the same,” said Nalin Chutchotitham, a Bangkok-based analyst at Kasikornbank Pcl. “Investors are still not back to risk-on trade.”
Global funds sold $2 billion more South Korean, Taiwanese and Thai shares than they bought this month through yesterday, exchange data show. EU finance ministers agreed to convene again on June 19, a day earlier than planned. Talks may drag on into July, Luxembourg’s Finance Minister Luc Frieden said.
Thai Political Risk
The baht traded near a three-month low as concern elections slated for July 3 will spark unrest prompted overseas investors to pull funds from the nation’s assets. Latest polls show Prime Minister Abhisit Vejjajiva’s Democrat party is trailing the Pheu Thai party, led by Yingluck Shinawatra, the sister of ex-leader Thaksin Shinawatra, who was ousted in a 2006 coup and lives abroad after fleeing a two-year jail sentence.
“The election is weighing quite heavily on the baht and Thai assets,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “The political problems in Thailand seem to be quite deep and can’t be easily solved.”
South Korea’s won rose by as much as 0.2 percent earlier after China reported industrial production rose 13.3 percent last month, compared with the 13.1 percent median estimate in a Bloomberg survey. South Korea’s jobless rate dropped to a six- month low of 3.3 percent in May, a report today showed. The won was little changed at 1,083 per dollar.
“There’s room for one more rate hike across Asia in the short term given the inflation pressure, which should support currencies,” said Suresh Kumar Ramanathan, a strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “Further out, growth is tailing off a bit and Europe remains a risk.”
Elsewhere, China’s yuan weakened 0.03 percent to 6.4822 per dollar and the Taiwan dollar was little changed at NT$28.86. India’s rupee was little changed at 44.725.
--With assistance from David Yong and Khalid Qayum in Singapore. Editors: Andrew Janes, Simon Harvey
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