Bloomberg News

Asia Currencies Drop as Europe Debt Crisis Starts to Slow Growth

December 09, 2011

Dec. 9 (Bloomberg) -- India’s rupee and South Korea’s won led declines in Asian currencies this week on signs the European debt crisis is starting to slow regional economic growth.

The Bloomberg-JPMorgan Asia Dollar Index fell 0.2 percent and the MSCI Asia-Pacific Index of stocks dropped 2.1 percent on concern euro-area leaders will fail to agree on a new package aimed at stemming the crisis and boosting confidence in financial markets. Malaysia reported today that export growth slowed in October, while Japanese data showed the economy expanded less than the initial estimate last quarter.

“We are seeing the risk-off mood and emerging-market currencies are under pressure,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “There’s concern about a global slowdown.”

The rupee declined 1.9 percent this week to 52.2012 per dollar as of 1:51 p.m. in Mumbai, according to data compiled by Bloomberg. The won weakened 1.4 percent to 1,146.83, Malaysia’s ringgit dropped 1.1 percent to 3.1546 and Indonesia’s rupiah fell 0.5 percent to 9,100.

Reports this week showed Thailand’s consumer confidence slumped to a decade-low of 61 last month and Taiwan’s exports grew the least in more than two years. Japan’s economy expanded at an annualized rate of 5.6 percent in the three months ended Sept. 30, the Cabinet Office said in Tokyo today, compared with a preliminary estimate of 6 percent.

Moody’s Investors Service cut the credit ratings of BNP Paribas SA, Societe Generale SA and Credit Agricole SA today, citing funding constraints and a deteriorating economic situation amid the debt crisis.

Malaysian Exports

Malaysia’s overseas sales increased 15.8 percent in October from a year earlier, after rising 16.6 percent in September, the government reported. That was more than the 7.3 percent median estimate of economists surveyed by Bloomberg. The Philippines will report on Dec. 13 that exports fell 16.9 percent in October, after dropping 27 percent in September, a separate survey showed.

European Central Bank President Mario Draghi damped speculation the bank will buy more government bonds to help halt rising yields. European Union leaders began a two-day summit on the crisis in Brussels yesterday.

“All eyes have been on the euro zone because that will determine the capital flows into emerging markets,” said Radhika Rao, an economist at Forecast Pte in Singapore.

China’s yuan declined this week on speculation policy makers will slow currency appreciation after inflation cooled to the least in 14 months. Consumer prices rose 4.2 percent in November from a year earlier after increasing 5.5 percent the previous month, the National Bureau of Statistics said today.

Yuan Depreciation

The risk of yuan depreciation is rising in the short term, triggered by “large-scale” capital outflows, Zhang Monan, a researcher at the State Information Center, wrote in a commentary in the China Securities Journal today.

The yuan fell 0.07 percent to 6.3643 per dollar this week in Shanghai, according to the China Foreign Exchange Trade System. The People’s Bank of China set the daily reference rate 0.05 percent lower at 6.3352, the weakest level since Dec. 1. The currency is allowed to fluctuate as much as 0.5 percent on either side of the fixing.

“Easing inflation implies there’ll be less room for yuan appreciation,” said Edmond Law, deputy head of foreign exchange at BWC Capital Markets in Hong Kong. “Officials will now shift their focus to protecting economic growth amid the increasingly uncertain global outlook. The inflation data confirms further monetary easing is likely.”

Elsewhere, the Philippine peso dropped 0.8 percent this week to 43.63 per dollar. Thailand’s baht declined 0.5 percent to 30.94, Taiwan’s dollar fell 0.3 percent to NT$30.239 and Singapore’s dollar weakened 1.3 percent to S$1.3006.

--With assistance from Yumi Teso in Bangkok, Lilian Karunungan in Singapore and Fion Li in Hong Kong. Editors: Simon Harvey, Andrew Janes

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

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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


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