Bloomberg News

Asian Currencies Fall as Europe Debt Concern Deters Risk-Taking

October 12, 2011

Oct. 12 (Bloomberg) -- Asian currencies dropped, led by Indonesia’s rupiah and the South Korean won, as concern Europe’s debt crisis will worsen sapped demand for higher-yielding assets.

The rupiah fell for a fourth day, the won retreated from a two-week high and Taiwan’s dollar snapped four days of appreciation after Slovakia’s parliament failed to ratify changes to the euro-region’s bailout fund in a vote yesterday. European officials are striving to meet an end-of-month target set by French President Nicolas Sarkozy stave off a default in Greece and shore up confidence in the euro.

“Concern Europe’s debt crisis will widen to a financial crisis is making investors risk averse and curbing demand for Asian assets, weighing on the currencies,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “In addition, under a crisis situation like this, demand for dollars increases.”

The rupiah dropped 0.3 percent to 8,939 per dollar as of 3:47 p.m. in Jakarta, according to data compiled by Bloomberg. The won slid 0.2 percent to 1,166.85 and Taiwan’s dollar declined 0.2 percent to NT$30.40.

The won retreated as overseas investors sold more local shares than they bought today, adding to net sales of about $8 billion in the past three months. The nation’s jobless rate was 3.2 percent in September, compared with a 3.1 percent level the previous month that was the lowest since July 2008, according to government data released today.

Rate Cut

“The markets are swinging back and forth in tandem with progress or setbacks in Europe’s plans to stem the crisis,” said Park Joo Hyung, a Seoul-based currency dealer at Korea Exchange Bank. “The Slovakia rejection threw cold water on sentiment again. This, together with importers’ dollar demand, is driving the won lower.”

The rupiah declined after the central bank unexpectedly cut its benchmark interest rate yesterday. Bank Indonesia lowered its reference rate by 25 basis points to 6.50 percent after holding it steady for seven months, citing easing inflation. The currency has slid 1.8 percent this month as foreign funds sold $55 million more Indonesian shares than they bought through yesterday, according to exchange data.

“The rupiah is declining because of the rate cut,” said Bambang Eko Joewono, the Jakarta-based head of the global- markets division at PT Bank UOB Indonesia. “We have also seen foreign investors exiting the market.”

U.S. Senate Bill

China’s yuan rose, reversing earlier losses, after the U.S. Senate passed a bill that would allow sanctions on countries with misaligned exchange rates. Treasury Secretary Timothy F. Geithner said in Washington yesterday in a Bloomberg TV interview that the nation must move more quickly to allow its currency to appreciate and he’s “very supportive” of the objectives of the Senate’s bill. The yuan added 0.3 percent to 6.3585 per dollar in Shanghai.

“The bill is aimed at U.S. election politics," Tim Condon, Singapore-based head of Asian research at ING Groep NV, wrote in a note today. "The threat of a trade war will keep it from being passed.”

Elsewhere, the Philippine peso was little changed at 43.405 per dollar and the Malaysian ringgit gained 0.2 percent to 3.1344. India’s rupee gained 0.5 percent to 49.07 and the Thai baht added 0.3 percent to 30.87.

--With assistance from Fion Li in Hong Kong, Kyoungwha Kim, Khalid Qayum and Lilian Karunungan in Singapore, Max Estayo in Manila and Elffie Chew in Kuala Lumpur. Editor: Sandy Hendry

%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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