Bloomberg News

Asian Currencies Drop on Slowdown Signs, Interest-Rate Outlook

October 04, 2011

Oct. 4 (Bloomberg) -- Asian currencies weakened, led by South Korea’s won, after data showed export growth is moderating in the region and slowing inflation reduced the likelihood of more interest-rate increases this year.

Indonesia and South Korea released figures this month showing slowing gains in overseas sales and consumer prices, while Thailand announced a lower inflation rate and export growth almost halved in India. Global inflationary pressure is easing as the world economic recovery slows, Taiwan’s central bank said in a report released yesterday. The bank left interest rates unchanged at a quarterly policy meeting last week, ending a run of five increases.

The won slumped 1.3 percent from last week’s closing level to 1,194.20 per dollar in Seoul, according to data compiled by Bloomberg. South Korea’s financial markets were closed yesterday for a holiday. Indonesia’s rupiah fell 0.7 percent today to 8,965 as of 3:13 p.m. in Jakarta, India’s rupee lost 0.6 percent to 49.4350 and Taiwan’s dollar dropped 0.3 percent to NT$30.68.

“The global economic slowdown is increasing downside growth risks for Asian countries that rely on exports and that puts downward pressure on regional currencies,” said Hideki Hayashi, a specially appointed fellow at the Japan Center for Economic Research in Tokyo. “Rate-hike expectations in the region are much reduced now. Sentiment remains quite weak.”

The won and the ringgit sank to their weakest levels since July 2010, while the Singapore and Taiwan dollars set new lows for the year, as concern Europe will fail to contain its debt crisis prompted investors to seek refuge in the dollar. The greenback strengthened against 15 of 16 major currencies tracked by Bloomberg.

European Debt Woes

Greece passed austerity measures yesterday that will cut its 2012 budget deficit to 6.8 percent of gross domestic product, short of the 6.5 percent goal previously agreed to secure financial aid from the European Union, International Monetary Fund and European Central Bank. Euro-region finance chiefs will meet on Oct. 13 to decide whether the push is enough to win bailout funds needed to avoid a default.

The won touched a 14-month low of 1,208.25 today, before paring its loss on suspected intervention and demand from exporters, said Lee Jung Ha, a currency trader with Korea Development Bank.

“Demand for dollars was strong, after Korean markets were closed for a holiday yesterday, on concern that Greece may default on its debt,” he said in Seoul. “There is speculation that the government intervened in the morning after the won weakened below 1,200. The currency trimmed losses in the afternoon as exporters sold dollars to convert income.”

South Korea’s export growth slowed to 19.6 percent in September from 25.9 percent in August, while consumer-price gains eased to 4.3 percent from 5.3 percent, official data show.

Indonesia Intervention

The rupiah fell for a second day after overseas investors cut holdings of the nation’s assets. Global funds owned 218.1 trillion rupiah ($24 billion) of the government’s local-currency bonds at the end of last month, 12 percent less than at the start, official figures show.

Bank Indonesia will remain in the market to stabilize the rupiah, Hendar, the central bank’s director of monetary policy, said yesterday as the currency declined toward its weakest level since June 2010.

“The possible default in Greece and the dimmer global economic outlook are now the major concerns in the market,” said Mika Martumpal, a currency analyst at PT Bank Commonwealth in Jakarta. “Global investors are taking profits in emerging markets and holding more dollar assets.”

Elsewhere, the Philippine peso declined 0.2 percent to 44.075 against the greenback and the Singapore dollar slid 0.3 percent to S$1.3152. Malaysia’s ringgit was little changed at 3.2068 while Thailand’s baht added 0.1 percent to 31.17. China’s onshore markets are closed this week for a public holiday.

--With assistance from David Yong in Singapore, Jiyeun Lee in Seoul and Fion Li in Hong Kong. Editors: James Regan, 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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