Bloomberg News

Asian Currencies Drop for Fourth Week on Europe Debt Concern

November 25, 2011

Nov. 25 (Bloomberg) -- Asian currencies dropped for a fourth week, led by South Korea’s won and India’s rupee, as Europe’s debt crisis showed no signs of abating, prompting investors to favor safer assets including the dollar.

The Bloomberg-JPMorgan Asian Dollar Index sank to a two- month low after German Chancellor Angela Merkel yesterday ruled out joint euro-area borrowing and an expanded role for the European Central Bank to fight the debt crisis. Germany failed to sell all of the bunds offered at an auction on Nov. 23 and Italy’s two-year bond yield rose to a record. Taiwan cut its economic growth forecasts yesterday, while the Reserve Bank of India announced measures to boost the supply of dollars.

“Merkel’s comment confirmed investors’ concerns that there is no short-term solution to the European debt crisis,” said Kim Doo Hyun, a senior currency dealer at Korea Exchange Bank in Seoul.

The Asian Dollar Index, which tracks the region’s 10 most- active currencies excluding the yen, fell 1 percent this week and the MSCI Asia-Pacific Index of shares lost 4.6 percent, their biggest declines in two months, according to data compiled by Bloomberg. The won slid 2.2 percent to 1,164.20 per dollar in Seoul, the rupee slumped 2 percent to 52.3650 and the Philippine peso dropped 1.3 percent to 43.94.

Global investors pulled more than $2.5 billion this week from stocks in South Korea and Taiwan, exchange data show. They also sold $485 million more Indian equities than they bought in the three days through Nov. 23. China’s yuan fell 0.3 percent to 6.3750 per dollar, its biggest weekly loss in 10 months, as a preliminary purchasing managers’ index showed manufacturing may contract this month by the most in nearly three years.

Korean Trade Data

The won dropped for a fourth week before trade figures due next week that are expected to show export growth in November stayed near a two-year low of 8 percent reported for October. Shipments rose 11.6 percent from a year earlier, based on the median estimate in a Bloomberg survey of economists. Growth in industrial output eased to 5.1 percent in October from 6.8 percent, a separate survey showed before a Nov. 30 report.

The rupee has lost 7 percent this month, prompting the central bank to yesterday loosen rules for companies to borrow abroad and sell foreign currencies through swaps. The monetary authority also raised interest rates on bank deposits for Indians living overseas.

‘Risk Aversion’

Malaysia’s ringgit fell 1.3 percent this week to 3.2010 per dollar, touching a seven-week low of 3.2019 today. Gross domestic product rose 5.8 percent in the third quarter from a year earlier, after gaining 4.3 percent in the preceding three months, official figures show.

“The European situation has sparked risk aversion,” said Enrico Tanuwidjaja, a currency strategist at Malayan Banking Bhd. in Singapore. “Domestically there is nothing worrying. Global developments play a more crucial role in explaining the weakening of the ringgit.”

Taiwan’s dollar dropped 0.7 percent this week to NT$30.46 versus the greenback, today touching a six-week low of NT$30.505. The statistics bureau said yesterday it expects gross domestic product to climb 4.51 percent this year and 4.19 percent in 2012, less than previous predictions for gains of 4.56 percent and 4.38 percent.

Elsewhere, Thailand’s baht slid 1.3 percent this week to 31.40 per dollar and Indonesia’s rupiah dropped 0.4 percent to 9,055.

--With assistance from Jeanette Rodrigues in Mumbai, Khalid Qayum in Singapore and Andrea Wong in Taipei. Editors: Andrew Janes, James Regan

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

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

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


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