Bloomberg News

Asian Currencies Decline, led by Won, as Greek Crisis Worsens

June 16, 2011

June 16 (Bloomberg) -- Asian currencies dropped, led by South Korea’s won, as Europe’s deepening debt crisis heightened risk aversion, damping demand for emerging-market assets.

The MSCI Asia-Pacific Index of regional stocks fell the most in three weeks as Greek Prime Minister George Papandreou is set to reshuffle his Cabinet and seek a confidence vote today, following the failure of attempts to garner opposition support for an austerity plan. European Union talks on a new bailout package for Greece to prevent the first euro-area default stalled yesterday.

“Investors are concerned about the Greek debt crisis, which doesn’t seem like it’ll be resolved any time soon,” said Han Sung Min, a currency trader at Busan Bank in Seoul. “That’s prompting investors to favor safer assets and dump riskier assets.”

The won slid 0.6 percent to close at 1,089.73 per dollar in Seoul. Indonesia’s rupiah dropped 0.6 percent to 8,597 and Singapore’s dollar slipped 0.5 percent to S$1.2407. Thailand’s baht and Malaysia’s ringgit declined 0.3 percent to 30.61 and 3.0455, respectively.

The impasse over the financial aid package for Greece and speculation that a government shakeup would disrupt passage of budget cuts and asset sales sent Greek bonds and the euro plunging. A report from the Federal Reserve yesterday showed manufacturing in the New York area unexpectedly contracted for the first time in seven months.

Global funds sold $835 million more Korean and Taiwanese equities than they bought in the first three days of this week. Some $465 million was pulled from Taiwan’s shares today, exchange data show.

Signs of Weakness

“The mounting signs of economic weakness in the U.S. as well as controversies surrounding the Greek bailout will erode risk appetite in Asian currencies,” said Choong Yin Pheng, manager for economic and fixed-income research at Hong Leong Bank Bhd. in Kuala Lumpur. “Investors are opting for safer assets.”

The baht dropped to a three-month low on concern the July 3 elections will spark instability. Army chief Prayuth Chan-ocha, who commanded troops in the 2006 coup that ousted former premier Thaksin Shinawatra, urged voters to pick “good people” in polls and warned criticism of the monarchy wouldn’t be tolerated, according to a video on the website of the military-controlled Channel 7 station.

“Some political instability ahead of the election in Thailand is also starting to weigh on the baht,” said Christopher Gothard , head of foreign exchange at Brown Brothers Harriman (Hong Kong) Ltd.

India’s rupee declined 0.2 percent to 44.8475 per dollar. The central bank raised interest rates for the 10th time since the start of 2010. The Reserve Bank of India increased the repurchase rate to 7.50 percent from 7.25 percent, according to a statement today. Nineteen of 20 economists in a Bloomberg News survey predicted the decision, while one expected no change.

Elsewhere, the Philippine peso weakened 0.3 percent to 43.53 per dollar. Taiwan’s dollar slipped 0.5 percent to 29.005, China’s yuan rose 0.08 percent to 6.4767 and the Vietnamese dong fell 0.2 percent to 20,606.

--With assistance from Yumi Teso in Bangkok. Editors: Andrew Janes, James Regan

%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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