Bloomberg News

Asia Currencies Drop on Europe Contagion Risks, Slowing Exports

November 17, 2011

Nov. 17 (Bloomberg) -- Asian currencies fell to a four-week low as a warning by Fitch Ratings that Europe’s deepening debt crisis poses a “serious risk” to U.S. lenders sapped demand for emerging-market assets.

The Bloomberg-JP Morgan Asia Dollar Index dropped for a fourth day, while the MSCI Asia-Pacific Index of stocks reached the lowest level in almost a month as France and Spain prepare to sell 12.2 billion euros ($16.4 billion) of bonds today. Adding to evidence that the crisis is hurting Asian exports, Singapore’s non-oil domestic shipments fell 16.2 percent in October from a year earlier, more than the 7.8 percent drop economists surveyed by Bloomberg predicted, data showed today.

“The weakness in Asian currencies reflects the concern about the growth outlook for Asian economies,” said Jackit Wong, a regional economist in Hong Kong at Natixis Asia Ltd. “Investors are cutting their holdings of emerging-market assets on risk aversion.”

Indonesia’s rupiah slumped 0.7 percent to 9,063 per dollar as of 9:50 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. Malaysia’s ringgit lost 0.4 percent to 3.1643, Singapore’s dollar weakened 0.2 percent to $1.2966 and South Korea’s won slipped 0.2 percent to 1,138.25. The Asia Dollar Index reached 115.51, the lowest level since Oct. 21.

New York-based Fitch said in a statement yesterday that the outlook for the U.S. banking industry could worsen without a timely resolution of the debt crisis. While U.S. lenders have manageable exposure tied to stressed markets in Greece, Ireland, Italy, Portugal and Spain, “further contagion poses a serious risk,” it said.

‘Selling Riskier Assets’

The rupiah reached a seven-week low after overseas investors sold $69 million more Indonesian shares than they bought yesterday, according to exchange data. Bank Indonesia lowered its 2012 economic growth forecast this week to 6.5 percent from a previous estimate of 6.7 percent.

“Because of Europe’s debt crisis there is a general trend that people are selling riskier assets,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “Indonesian economic fundamentals are strong, so the focus has been on external factors.”

In South Korea, sales at major department stores rose 3.1 percent in October from a year earlier, the smallest gain in 30 months, the Ministry of Knowledge Economy said today. Consumer prices are stabilizing after price gains in agricultural and dairy products slowed, Newspim reported today, citing Finance Minister Bahk Jae Wan.

Yuan Drops

“The ongoing uncertainties in Europe and the Fitch report will trigger risk-averse sentiment,” said Jeon Seung Ji, a currency analyst with Samsung Futures Inc. in Seoul. “Still, exporters may start selling dollars when the won weakens.”

China’s yuan depreciated 0.07 percent to 6.3502 per dollar in Shanghai, snapping a two-day advance, after the central bank set its reference rate lower for a third straight day. Standard Chartered Plc trimmed its yuan forecast to 6.24 by June 2012 from 6.18 on the trade and inflation outlook.

“The case for a slowdown in yuan gains is broad-based, but is dominated by China’s balance-of-payments prospects and inflation dynamics,” analysts Robert Minikin and Stephen Green wrote in a note to clients today.

Elsewhere, Taiwan’s dollar fell 0.1 percent to NT$30.250 against its U.S. counterpart. Thailand’s baht dropped 0.1 percent to 30.86 and the Philippine peso declined 0.1 percent to 43.475.

--With assistance from Jiyeun Lee in Seoul. Editors: Andrew Janes, Simon Harvey

%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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