Bloomberg News

Asian Currencies Weaken, Led by Won, on European Debt Concern

September 06, 2011

Sept. 6 (Bloomberg) -- Asian currencies fell, led by South Korea’s won, on concern Europe’s worsening debt crisis and the slowing U.S. economy will reduce exports and sap demand for emerging-market assets.

South Korea, Asia’s fourth-largest economy, is facing uncertainties from global downside risks and volatile financial markets, its finance ministry said today. The Stoxx Europe 600 Index posted its biggest two-day drop since March 2009 yesterday as the fifth election defeat for German Chancellor Angela Merkel’s party this year and reports of a rift between European leaders and the International Monetary Fund added to concern that support for bailing out indebted nations is waning.

“The euro-zone sovereign issue and also the U.S. economy increased a lot of uncertainties in the market, especially for Asian economies,” said Andy Ji, a currency strategist at Commonwealth Bank of Australia in Singapore. “It’s risk-off” for Asian currencies, he said.

The won slid 0.6 percent to 1,074.82 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. Indonesia’s rupiah weakened 0.3 percent to 8,563 and the Philippine peso dropped 0.2 percent to 42.28.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, reached 119.21, the lowest level in more than a week. The MSCI Asia- Pacific Index of shares lost 1.4 percent, taking its three-day decline to 5.1 percent.

Global Headwinds

The Institute for Supply Management’s non-manufacturing index for the U.S. fell to 51 last month, the lowest since January 2010, from 52.7 in July, a Bloomberg survey showed before a report today. A reading of 50 is the dividing line between expansion and contraction.

The won fell for a third day as South Korea’s finance ministry said the nation’s current-account surplus may narrow in August from July as exports declined while factories were closed for the summer holidays. Local financial markets are closed on Sept. 12 and 13 for the Chuseok holiday.

“European stock movements heightened risk-averse sentiment in the market, pushing the won down,” said Lee Jin Ill, a Seoul-based senior currency dealer at Hana Bank. “Exporters’ sales of dollars before the Chuseok holiday may limit losses.”

The peso fell the most in almost two weeks as Philippine central bank Governor Amando Tetangco said in a speech in Manila today that the downside risks to global economic growth have increased and “headwinds” are impeding expansion. Asia needs to boost investments and consumption as a slowdown in advanced economies will likely affect the region, he said.

Risk Aversion Rising

“The peso’s weaker as risk aversion rises on concern over deteriorating fundamentals in the U.S. and euro zone,” said Jonathan Ravelas, chief market strategist at Banco de Oro Unibank Inc. in Manila.

Elsewhere, the Singapore and Taiwan dollars fell 0.1 percent to S$1.2068 and NT$29.112, respectively, against their U.S. counterpart. Thailand’s baht weakened 0.1 percent to 29.92, China’s yuan slipped 0.08 percent to 6.3908, while India’s rupee and Malaysia’s ringgit were little changed at 45.9913 and 2.9823, respectively.

--With assistance from Clarissa Batino in Manila and Jiyeun Lee in Seoul. Editors: Andrew Janes, Anil Varma

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

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


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