Bloomberg News

Asia Currencies Decline as Europe Debt Woes Boost Dollar Demand

September 13, 2011

Sept. 13 (Bloomberg) -- Asian currencies weakened, led by Taiwan’s dollar and Malaysia’s ringgit, as Europe’s worsening debt crisis boosted demand for the relative safety of the dollar.

The ringgit fell to its weakest level since June, while the island’s dollar reached a five-month low, as German Chancellor Angela Merkel said, in a radio interview to be broadcast today, that she won’t let Greece fall into an “uncontrolled insolvency” because the risk of contagion for other euro-area nations “is very big.” Italy will attempt to raise as much as 7 billion euros ($9.5 billion) in a bond sale today.

Taiwan’s dollar slumped 0.9 percent to NT$29.487 against the greenback as of 4 p.m. local time, according to Taipei Forex Inc. The ringgit dropped 0.7 percent to 3.0565, India’s rupee slid 0.4 percent to 47.385 and China’s yuan fell 0.17 percent to 6.3991.

“We aren’t surprised to see this move in the market because of the problems in Europe, especially worries about Greece,” said Norawit Suparinayok, a foreign-exchange trader at Bangkok Bank Pcl. “Investors and traders are seeking safe-haven assets.”

International investors sold $2.3 billion more South Korean and Taiwanese shares than they bought last week, according to exchange data.

Italian officials have held talks with their Chinese counterparts about potential investments in the euro region’s third-largest economy, an Italian government official said yesterday. Debt of 1.9 trillion euros -- more than Spain, Greece, Ireland and Portugal combined -- leaves Italy vulnerable to any advance in borrowing costs as it refinances maturing bonds.

Hurting Exports

Taiwan’s dollar fell by the most since April 2009 on speculation the deteriorating global economy will further damage the island’s exports. Overseas shipments rose 7.2 percent in August from a year earlier, the least since they last declined in October 2009, data showed on Sept. 8. Economists expected a 15.5 percent increase, a Bloomberg survey showed.

“Europe’s debt crisis continues to damp sentiment,” said Henry Lin, a Taipei-based foreign-exchange trader at Taiwan Shin Kong Commercial Bank. “Looks like the depreciation trend will continue.”

The ringgit weakened for a seventh day on speculation Europe’s debt crisis will prompt policy makers to halt monetary policy tightening. The one-year interest-rate swap slid yesterday to the lowest level in 2011 after Bank Negara Malaysia kept its policy rate on hold last week, citing the possible fallout from global slowdown risks.

“The Europe situation remains unresolved and people are avoiding risk because of the potential domino effect,” said Nik M. Khairul, a treasury dealer at Asian Finance Bank Bhd. in Kuala Lumpur. “There’s little room for central banks to tighten for the rest of this year given the slowdown signs.”

Elsewhere, Indonesia’s rupiah declined 0.6 percent to 8,673 per dollar, according to data compiled by Bloomberg. Singapore’s dollar slumped 0.5 percent to S$1.2397, the Philippine peso fell 0.4 percent to 42.975 and Thailand’s baht declined 0.2 percent to 30.20. Financial markets in South Korea are closed for a public holiday.

--With assistance from Andrea Wong in Taipei and David Yong in Singapore. Editors: Andrew Janes, Ven Ram

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

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

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


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