Bloomberg News

Asian Currencies Weaken After S&P Warns Europe on Downgrades

December 06, 2011

Dec. 6 (Bloomberg) -- Asian currencies dropped, led by Indonesia’s rupiah, after Standard & Poor’s warned that the credit ratings of 15 euro-area nations may be cut, adding to concern global growth is slowing.

The MSCI Asia-Pacific Index of shares snapped a six-day rally after S&P put countries including Germany and France on review for possible downgrade, saying a decision may be made following a summit of European Union leaders on Dec. 9. German Chancellor Angela Merkel and French President Nicolas Sarkozy are pushing for a rewrite of the EU’s governing rules to tighten economic cooperation.

“The comments from S&P are making people risk-averse and boosting dollar demand,” said Disawat Tiaowvanich, a foreign- exchange trader at Bangkok Bank Pcl. “The main driver of the market is developments in Europe.”

The rupiah declined 0.3 percent to 9,083 per dollar as of 9:48 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. Malaysia’s ringgit dropped 0.2 percent to 3.1370, the Philippine peso weakened 0.2 percent to 43.370 and Thailand’s baht fell 0.2 percent from Dec. 2 to 30.85 per dollar as it resumed trading after a public holiday yesterday.

South Korea’s economy may slow due to signs of global weakness and a decline in international trade, the nation’s Finance Minister Bahk Jae Wan said at a ministerial meeting in Seoul today. Bank of Thailand Director Singhachai Boonyayotin said Dec. 2 the baht’s strength may prove short-lived because of uncertainties in the global economy.

‘Increasingly Concerned’

China’s yuan tested the weaker end of its permitted trading range for a fifth day on concern economic growth in Asia’s largest economy is faltering. The People’s Bank of China set its daily reference rate little changed at 6.3334 per dollar, almost 0.5 percent stronger than the currency’s close yesterday.

“The market is increasingly concerned about the state of China’s property and export sectors as the euro-zone debt crisis deepens,” said Steve Wang, the Hong Kong-based head of fixed- income research at Bank of China International, a unit of China’s third-biggest lender by market value.

The yuan dropped 0.01 percent to 6.3648 per dollar. The currency is allowed to trade up to 0.5 percent either side of the fixing. Twelve-month non-deliverable forwards fell 0.10 percent to 6.3860, a 0.3 percent discount to the onshore spot rate.

Taiwan’s dollar dropped for a third day after the central bank said yesterday foreign-exchange reserves fell to the lowest level in 10 months. A finance ministry report on Dec. 8 will show export growth slowed to 8.6 percent in November from a year earlier, compared with 11.7 percent the previous month, according to the median estimate of economists surveyed by Bloomberg. International reserves fell $5 billion last month to $388 billion.

‘Outward Remittances’

“Taiwan’s foreign-exchange reserves dropped, so that means outward remittances from Taiwan are bigger,” said Tarsicio Tong, a trader at Union Bank of Taiwan in Taipei. “Exporters who want to sell U.S. dollars will want a higher price.”

Taiwan’s dollar declined 0.1 percent to NT$30.217 against its U.S. counterpart, according to Taipei Forex Inc.

South Korea’s economy expanded 0.8 percent in the three months through September from the second quarter, compared with an October estimate for a 0.7 percent gain, the Bank of Korea said in Seoul today. The won declined 0.2 percent to 1,131.50 per dollar.

Philippine inflation slowed to 4.8 percent in November after a 5.2 percent gain in October, government data showed today, prompting the central bank to signal it has scope to lower interest rates.

Elsewhere, Singapore’s dollar weakened 0.2 percent to S$1.2841 against its U.S. counterpart and Vietnam’s dong was little changed at 21,015.

--With assistance from Elffie Chew in Kuala Lumpur, Lilian Karunungan in Singapore, and Yumi Teso in Bangkok. Editors: Andrew Janes, Sandy Hendry

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

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; 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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