Bloomberg News

Asian Currencies Decline as Europe Funding Woes Heighten Risks

November 16, 2011

Nov. 16 (Bloomberg) -- South Korea’s won and Indonesia’s rupiah led declines in Asian currencies on speculation higher borrowing costs in Europe will complicate efforts to contain the region’s debt crisis, curbing appetite for riskier assets.

The won slid after bonds from France, Belgium, Spain and Austria climbed yesterday to the highest premiums over German bunds since the euro was introduced. The rupiah headed for the lowest close since September, while Malaysia’s ringgit erased losses before a report in two days that may show economic growth quickened last quarter.

“We think Asian currencies will depreciate by the end of year because of the euro-zone fiscal crisis,” said Dariusz Kowalczyk, a senior economist at Credit Agricole CIB in Hong Kong. “Risk aversion will dominate trading in the near term.”

The won weakened 0.9 percent to 1,135.88 per dollar as of 12:03 p.m. in Seoul, according to data compiled by Bloomberg, after a 0.3 percent loss yesterday. The rupiah slid 0.3 percent to 9,020. India’s rupee fell 0.2 percent to 50.76, reaching the lowest in 2 1/2 years.

Italy’s 10-year bond yields rose above 7 percent yesterday, a threshold that led Greece, Ireland and Portugal to seek bailouts, while Spain and Belgium sold less than planned at debt auctions. Global funds pulled $976 million from Korean stocks this month through yesterday and cut their holdings of Taiwanese equities by $254 million, stock exchange data show.

“Investors are buying the dollar amid all the uncertainties we are seeing in the global environment,” said Roy Paul, the Mumbai-based deputy general manager of fixed income and currencies at Federal Bank Ltd. The rupee’s slide may induce intervention from the central bank, he said.

Exports Outlook

The MSCI Asia Pacific Index slipped 1.2 percent, following a 0.9 percent drop yesterday. Bank Indonesia lowered its fourth- quarter economic growth forecast yesterday to 6.6 percent from 6.7 percent, citing a global slowdown. Korean Finance Minister Bahk Jae Wan told a meeting in Seoul today that financial market volatility is rising at home and abroad.

“The currency will weaken on uncertainties surrounding Italy, but further movements may depend on dollar supply and demand from exporters and importers,” said Ha Jun Woo, a trader with Daegu Bank in Seoul. “It has become difficult to forecast a direction for the won recently as it is moving within a narrow range.”

Taiwan’s dollar fell 0.1 percent to NT$30.23. Export orders probably rose 3.8 percent in October from a year earlier, according to the median estimate in a Bloomberg News survey before a Nov. 21 report. Orders gained 2.7 percent in September, the least in two years.

“Taiwan’s dollar will continue its depreciating trend due to the weaker global growth prospects,” said Henry Lin, a currency trader in Taipei at Taiwan Shin Kong Commercial Bank. “It looks like there’s a big chance the debt crisis will spread to countries like Italy and Belgium.”

China Fixing

The yuan was little changed at 6.3456 per dollar at the close in Shanghai, according to China Foreign Exchange Trade System. The People’s Bank of China set its reference rate lower for a second day, weakening it by 0.12 percent to 6.3509. The fixing was cut 0.2 percent yesterday, the biggest drop in a month, after U.S. President Barack Obama the previous day criticized China for not allowing its currency to appreciate fast enough.

“The fixing in the past two days had certain political undertones to it as it followed very loud criticism from President Obama,” said Sacha Tihanyi, a Hong Kong-based strategist at Scotia Capital. “It may be China sending the message that overly direct criticism of its currency policy is counter-productive.”

Malaysia’s ringgit advanced 0.2 percent to 3.1515 per dollar, reversing a a 0.3 percent loss. Southeast Asia’s third- largest economy probably grew at an annual rate of 4.8 percent in the third quarter, versus 4 percent in the preceding three months, according to a Bloomberg News survey before the Nov. 18 report.

Elsewhere, Thailand’s baht climbed 0.1 percent to 30.81 and the Philippine peso depreciated 0.1 percent to 43.415 per dollar.

--With assistance from Andrea Wong in Taipei, Jiyeun Lee in Seoul and Kyoungwha Kim in Singapore and Jeanette Rodrigues in Mumbai. Editor: Sandy Hendry

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

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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


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