Nov. 15 (Bloomberg) -- Asian currencies weakened, led by South Korea’s won and the Indonesian rupiah, as a jump in Italy’s borrowing costs reignited concern Europe’s debt crisis will worsen, cutting demand for emerging-market assets.
The MSCI Asia-Pacific Index of shares snapped two days of gains after Italy sold 3 billion euros ($4.1 billion) of five- year bonds yesterday at a yield of 6.29 percent, the highest level since June 1997 and up from 5.32 percent at the last auction on Oct. 13. International investors pulled $1.6 billion out of the stock markets of South Korea, Taiwan and Thialand this month through Nov. 14, exchange data show.
Asian currencies are “very much driven by developments out of Europe,” said Thio Chin Loo, a Singapore-based senior currency analyst at BNP Paribas SA. “Europe needs time and efforts to undertake the reforms and sentiment will swing during this period of uncertainty.”
The won fell 0.2 percent to 1,125.45 as of 12:17 p.m. in Seoul, according to data compiled by Bloomberg. The rupiah dropped 0.3 percent to 8,995. The Malaysian ringgit and Taiwan’s dollar slipped 0.2 percent to 3.1443 and 30.21, respectively. The Thai baht retreated 0.1 percent to 30.79.
The world economy is facing “significant downside risks” stemming in part from the European debt crisis, leaders at the Asia-Pacific Economic Cooperation forum in Honolulu said in a statement on Nov. 13. Growth and job creation have weakened in many countries and further trade liberalization is “essential” to boost economic expansion, they said.
Third-quarter growth in the euro area slowed to 1.4 percent from a year earlier from 1.6 percent in the previous three-month period, economists in a Bloomberg survey forecast before the European Union’s statistics office releases the data today. France’s economy expanded 1.6 percent from the same period a year earlier, compared with a 1.7 percent gain in the second quarter, a separate poll showed.
The won snapped a two-day advance as South Korea’s Finance Minister Bahk Jae Wan said in Seoul the government may need to scale up spending in the first half of next year as the local economy weakens. The Bank of Korea held off from raising borrowing costs for a fifth straight month on Nov. 11 amid signs domestic growth is slowing.
“The won has been moving within a range of 1,110 to 1,130 recently, changing directions upon daily news from Europe,” said Lee Jin Ill, a Seoul-based senior currency dealer at Hana Bank. “The currency will weaken today as Italy’s debt yields jumped.”
The yuan was steady at 6.3540 after reaching a three-week low of 6.3658 earlier after the central bank weakened its daily reference rate by the most in a month. The People’s Bank of China set the reference rate 0.21 percent weaker at 6.3436 per dollar, the biggest decline since Oct. 13.
“The weaker fixing reflects China is getting more worried about Europe’s debt crisis,” said Edmond Law, deputy head of foreign-exchange at BWC Capital Markets in Hong Kong. “If the yuan gets too strong relative to other currencies in the region, it could hurt China’s exports and its economic growth.”
Elsewhere, the Philippine peso dropped 0.2 percent to 43.330 per dollar, the Vietnamese dong was little changed at 21,006 per dollar. The Singapore dollar fell 0.2 percent to S$1.2879 against its U.S. counterpart.
--With assistance from Jiyeun Lee in Seoul. Editors: Anil Varma, Andrew Janes
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