Sept. 26 (Bloomberg) -- South Korea’s won and Indonesian rupiah led a slide in Asian currencies on concern Europe will fail to contain its debt crisis, damping the outlook for Asian exports and reducing demand for emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index fell toward a 10- month low as the MSCI Asia-Pacific Index of shares dropped for a third day. Failure to combat the Greek-led turmoil threatened “cascading default, bank runs and catastrophic risk,” U.S. Treasury Secretary Timothy F. Geithner warned in Washington over the weekend.
“Foreign money is leaving Asian equities,” said Sean Callow, a Sydney-based senior currency strategist at Westpac Banking Corp. “Some capital that was rolled into Asian bonds is now simply exiting to cover losses in Europe and US. Wealth destruction will hurt spending and there will be some further weight on Asian exports to Europe as growth slows.”
The won sank 2.1 percent to 1,192.85 per dollar as of the 3 p.m. local time close, approaching a one-year low of 1,196.13 touched Sept. 23, according to data compiled by Bloomberg. Indonesia’s rupiah slumped 3.6 percent to 9,113, according to onshore prices compiled by Bloomberg. Taiwan’s dollar declined 0.6 percent to NT$30.572, Thailand’s baht lost 0.9 percent to 31.17 and the Philippine peso fell 0.6 percent to 43.863.
Germany’s Deputy Finance Minister Joerg Asmussen said yesterday that euro-region finance ministers won’t be in a position to decide on the disbursement of the next tranche of aid to Greece when they meet on Oct. 3. Billionaire investor George Soros said “something needs to be done” to safeguard Europe’s banks because Greece may be unable to avoid default.
“Asian currencies are going to remain a bit soft until we get some concrete actions” on Europe’s bailout, said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “European leaders are showing they are more concerned about the debt situation.”
Thailand’s baht weakened for a fourth day after the central bank said Europe’s debt crisis and a slowing global recovery may prompt a cut in growth projections for Southeast Asia’s second- biggest economy. Thailand may intervene to ease volatility in the baht, central bank governor Prasarn Trairatvorakul said in Washington yesterday.
“If there are abrupt movements, we certainly have the ammunition to do some market intervention but the aim is not to change the direction but to lower the sharp volatility at times,” he said.
South Korean Intervention
International investors sold $521 million more Thai equities than they bought this month through Sept. 23, and were net sellers of government debt in the last three days, according to data from the stock exchange and the Thai Bond Market Association. The Bank of Thailand expects the economy to grow 4.1 percent in 2011 and 4.2 percent next year.
South Korea’s won fell after rebounding in the final minutes of trading on Sept. 23 to close 1.1 percent stronger. The nation’s finance ministry and central bank said last week that they were ready to intervene.
“The won is weakening today as the government artificially intervened in the market on Friday, and as nothing has been solved regarding Europe’s debt issue,” said Lee Jung Hyun, a currency dealer at the Industrial Bank of Korea in Seoul. “Still, the government has shown its will to prevent the currency from falling below the 1,200 level, which will make investors cautious about betting on a strong dollar.”
Elsewhere, Malaysia’s ringgit dropped 0.2 percent to 3.1910 per dollar. Singapore’s dollar weakened 0.4 percent to S$1.3048 and China’s yuan fell 0.2 percent to 6.4006.
--With assistance from Jiyeun Lee in Seoul, and David Yong in Singapore. Editors: Andrew Janes, Anil Varma
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