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June 23 (Bloomberg) -- Asian currencies declined, led by South Korea’s won and Malaysia’s ringgit, after the Federal Reserve cut its growth forecast for the U.S. economy and concern that Greece will default lingered.
The MSCI Asia-Pacific Index of shares dropped by the most in a week after the Fed said the world’s largest economy will expand 2.7 percent to 2.9 percent this year, down from April’s forecast of 3.1 percent to 3.3 percent. European Central Bank President Jean-Claude Trichet said yesterday risk signals for financial stability in the euro area are flashing “red” as Greece’s debt crisis threatens to infect banks.
“The unresolved Greek debt woes and the weaker economic outlook in the U.S. are weighing on sentiment,” said D. Sivadass, a foreign-exchange forwards trader at EON Capital Bhd. in Kuala Lumpur. “In times of turmoil, the dollar is the safe currency.”
The won fell 0.3 percent to 1,076.80 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The Philippine peso slid 0.3 percent to 43.487, the ringgit weakened 0.3 percent to 3.0330 and China’s yuan declined 0.07 percent to 6.4676.
European leaders begin a two-day summit in Brussels today to discuss Greece’s financing needs amid speculation Greek Prime Minister George Papandreou will face difficulty in getting parliamentary approval next week for a package of budget cuts and asset sales. Finance chiefs will decide on July 3 whether Greece has met conditions for the next aid payment. Overseas investors have pulled $2.9 billion from South Korean, Taiwanese and Thai equities this month.
The Fed also forecast the U.S. jobless rate will average 8.6 percent to 8.9 percent in the fourth quarter, compared with an 8.4 percent to 8.7 percent projection in April.
The People’s Bank of China set the yuan’s reference rate weaker for the first time in five days, fixing it at 6.4736 per dollar. China’s economy will have a “soft landing” in the second half, China Business News reported today, citing Chen Dongqi, deputy chief of the Macroeconomic Research Institute under the National Development and Reform Commission.
“Right now, there’s no clear country-specific direction for the yuan and the currency is expected to be moving in line with what everybody else is doing,” said Joseph Lau, a Hong Kong-based regional economist with Societe Generale SA.
Thailand’s baht fell 0.1 percent to 30.51 against the dollar as concern the July 3 elections will spark instability was offset by stronger-than-expected export data. Overseas sales, which account for about two-thirds of Southeast Asia’s second- largest economy, climbed 17.6 percent in May from a year earlier, more than the 15.6 percent gain that economists surveyed by Bloomberg forecast, data showed this week.
“There is concern about protests and other chaotic situations in Thailand due to the election and the baht may see downward pressure for now,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo.
Elsewhere, Indonesia’s rupiah was little changed at 8,601 against the greenback. Singapore’s dollar fell 0.1 percent to S$1.2346, Taiwan’s dollar slid 0.2 percent to NT$28.936 and India’s rupee declined 0.1 percent to 44.9213.
--With assistance from Yumi Teso in Bangkok. Editors: Andrew Janes, Ven Ram
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