Oct. 11 (Bloomberg) -- Asian currencies fell, reversing earlier gains, as renewed concern Europe’s debt crisis will worsen spurred investors to favor the dollar’s relative safety over emerging-market assets.
The rupiah fell as Bank Indonesia unexpectedly cut its benchmark interest rate for the first time in more than two years to spur growth. European stocks dropped for the first time in five days as central bank President Jean-Claude Trichet said the region’s debt crisis now threatens the financial system as officials race to put together a new plan to contain the turmoil.
The rupiah dropped 0.4 percent to 8,941 per dollar as of 3:28 p.m. in Jakarta, according to data compiled by Bloomberg. India’s rupee slumped 0.6 percent to 49.245, Malaysia’s ringgit fell 0.4 percent to 3.1385 and Thailand’s baht declined 0.3 percent to 30.96. China’s yuan fell 0.4 percent to 6.3750, trimming yesterday’s 0.6 percent appreciation, which was the biggest since its revaluation in July 2005.
“Trichet’s comments reminded investors that Europe’s problems are not fundamentally solved,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “When concern is heightened, investors of course boost demand for dollars and sell emerging-market assets.”
The Bloomberg-JPMorgan Asia Dollar Index declined for the first time in six days, losing 0.7 percent to 115.33.
Indonesia Cuts Rate
The rupiah weakened after foreign ownership of local debt declined 4 trillion rupiah ($447 million) this month through Oct. 5, following record withdrawals of 29.3 trillion rupiah in September, according to data from the finance ministry’s website. Bank Indonesia will purchase government bonds and remain in the currency market to stabilize the rupiah, Hendar, its director of monetary policy who uses only one name, said on Oct. 3.
The central bank lowered the reference rate by a quarter percentage point to 6.5 percent, it said in a statement in Jakarta today. None of the 15 economists surveyed by Bloomberg News expected the decision.
“The central bank is worried about slowing growth in the global economy,” said Juniman, chief economist at PT Bank Internasional Indonesia in Jakarta who goes by only one name. “The rupiah will depreciate in the short term because yields are going down. Investors expected the rate to be flat.”
The Thai baht fell amid concern the nation’s worst floods in more than half a century will hurt the economy.
The finance ministry cut its 2011 growth forecast for the economy yesterday after the floods forced Honda Motor Co., Japan’s third-largest automaker, and the world’s two biggest makers of high-end cameras, Canon Inc. and Nikon Corp., to suspend production at factories. Gross domestic product will increase 3.7 percent this year, according to the ministry. That compares with last month’s prediction for a gain of 3.8 percent to 4.3 percent policy makers had forecast last month.
“With the closure of factories and the halting of production, there’s concern floods will not only hurt exports but also employment,” Dai-ichi Life Research’s Nishihama said. “You don’t want to buy the baht now.”
Elsewhere, the Philippine peso slid 0.1 percent to 43.435 per dollar. South Korea’s won climbed 0.6 percent to 1,164.50 and Taiwan’s dollar appreciated 0.5 percent to NT$30.348.
--With assistance from Fion Li in Hong Kong, Kyoungwha Kim in Singapore and Elffie Chew in Kuala Lumpur. Editors: Anil Varma, Sandy Hendry
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