Bloomberg News

Asia Currencies Decline for Second Week on Rates, Europe Crisis

November 13, 2011

Nov. 12 (Bloomberg) -- Asian currencies dropped for a second week on speculation Europe’s worsening debt crisis will weaken exports and prompt regional policy makers to cut borrowing costs.

Global investors sold $1.6 billion more South Korean, Taiwanese and Thai stocks than they bought this week, exchange data showed. The European Central Bank bought Italian bonds on Nov. 10 after borrowing costs rose to a euro-era record and Greece put forward a unity government to help secure more bailout funds. Asian currencies gained yesterday after better- than-expected U.S. jobs data spurred a rebound in stocks and commodities.

“The market is seeing some rebound but this is not to say that stability is here to stay,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “With growth slowing, policy makers in Asia are beginning to lean toward policy easing from China to Singapore.”

India’s rupee lost 2 percent this week to 50.1150 per dollar in Mumbai, according to data compiled by Bloomberg. South Korea’s won slid 1.4 percent to 1,126.61, Malaysia’s ringgit declined 1.1 percent to 3.1488 and the Philippine peso dropped 0.9 percent to 43.28.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, lost 0.6 percent this week. The MSCI Asia-Pacific Index of stocks rose 0.8 percent yesterday to pare its weekly loss to 2.7 percent. U.S. jobless claims fell to a seven-month low of 390,000 in the week ended Nov. 5, the Labor Department said Nov. 10.

Malaysian Rate Review

“The concern has clearly shifted to growth, which means the outlook on interest-rate differentials with the U.S. is narrowing and that’s why currencies in the region are weak,” said Marcelo Ayes, senior vice president at Rizal Commercial Banking Corp. in Manila.

Bank Indonesia cut its reference rate by 50 basis points to 6 percent on Nov. 10. Eleven of 19 analysts surveyed by Bloomberg predicted policy makers would keep the rate on hold, while eight expected a 25-basis point cut. The Bank of Korea kept its seven-day repurchase rate at 3.25 percent for a fifth month yesterday. Bank Negara Malaysia left its overnight rate at 3 percent yesterday, as predicted by 18 of 19 analysts surveyed by Bloomberg. One forecast a 25-basis point cut.

Europe Plans

Earlier this week, European finance ministers failed to bridge divisions over the European Stability Mechanism, a permanent rescue fund aimed at stemming the region’s debt crisis. The International Monetary Fund may cut its growth forecasts as the global economy enters a “dangerous phase,” Managing Director Christine Lagarde said in Moscow on Nov. 7.

China’s yuan dropped 0.05 percent this week to 6.3424 per dollar, snapping a two-week advance. Exports increased 15.9 percent in October from a year earlier, less than the 16.1 percent economists surveyed by Bloomberg forecast, data showed Nov. 10.

The currency was little changed yesterday as Hong Lei, a Chinese foreign ministry spokesman, said at a briefing in Beijing that policy makers would proceed with exchange-rate reform. U.S. Treasury Secretary Timothy F. Geithner said Nov. 10 that China has acknowledged the importance of faster adjustments in the yuan.

Elsewhere, Taiwan’s dollar dropped 0.5 percent this week to NT$30.188 against its U.S. counterpart. Thailand’s baht weakened 0.6 percent to 30.84 and Indonesia’s rupiah fell 0.2 percent to 8,967.

--With assistance from Andrea Wong in Taipei and Lilian Karunungan in Singapore. Editors: Andrew Janes, James Regan

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

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Khalid Qayum in Singapore at kqayum@bloomberg.net.

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


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