Bloomberg News

Rupee Leads Declines Among Asian Currencies on Growth Concern

December 12, 2011

Dec. 12 (Bloomberg) -- India’s rupee led declines among Asian currencies as data showed manufacturing in Asia’s third- largest economy contracted more than economists forecast, adding to concern Europe’s debt crisis is slowing growth.

Factory output shrank 5.1 percent in October, compared with the median estimate for a 0.7 percent decline, according to a Bloomberg survey. It was the first contraction since June 2009. The Bloomberg-JPMorgan Asia Dollar Index dropped after last week’s European summit resulted in an agreement that tightens budget rules and provides an extra 200 billion euros ($265 billion) of financial aid for euro-area nations.

“The market expectation was for a much swifter solution than what was discussed at last week’s European summit,” said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. “There’s a linkage between the financial markets and the real economy, and Asia is not doing well.”

The rupee slid 1 percent to 52.5762 per dollar as of 3:01 p.m. in Mumbai, according to data compiled by Bloomberg. Malaysia’s ringgit weakened 0.3 percent to 3.1600 and Vietnam’s dong dropped 0.5 percent to 21,105.

Moody’s Investors Service said today that the European Union summit last week offered few new measures and doesn’t diminish the risk of credit-rating revisions.

Fitch Ratings is poised to cut growth estimates for Asian nations as Europe’s debt crisis weighs on the outlook for the world economy. Quarterly predictions due to be released by the company “shortly” will see growth downgraded for Asian countries, Andrew Colquhoun, the company’s Hong Kong-based head of Asia-Pacific Sovereigns, said in an interview with Bloomberg Television today.

Possible Rate Cut

The rupee dropped by the most since Nov. 21 and touched the lowest level in almost three weeks.

“The data is only a reflection of the problems in the economy,” said Vikas Babu, a currency trader at state-run Andhra Bank in Mumbai. “We have to see how this plays out, as it might compel the Reserve Bank of India to cut rates going ahead, which would boost capital inflows.”

The yuan gained as a report in the Financial News, citing Xuan Changneng, head of the People’s Bank of China’s financial stability bureau, said policy makers will maintain flexibility based on China’s situation while pushing forward with interest- rate and exchange-rate reform. The central bank raised its daily fixing 0.09 percent to 6.3297 per dollar, the strongest level since Nov. 9. Overseas sales rose 13.8 percent in November from a year earlier, the smallest gain since 2009, official data show.

Stronger Yuan Fixing

“The PBOC’s comment quelled investors’ depreciation expectations after the weaker export growth,” said Kenix Lai, a Hong Kong-based currency analyst at Bank of East Asia Ltd. “The stronger fixing also shows that China will still allow gains in the currency, even though the pace may slow.”

The yuan advanced 0.06 percent to close at 6.3606 per dollar in Shanghai, the biggest advance since Dec. 2, according to the China Foreign Exchange Trade System. The currency is allowed to fluctuate as much as 0.5 percent on either side of the PBOC’s fixing.

Elsewhere, Indonesia’s rupiah strengthened 0.3 percent to 9,051 per dollar, according to prices from local banks compiled by Bloomberg. The Taiwan dollar and South Korea’s won were little changed at NT$30.230 and 1,146.95, respectively. Financial markets in Thailand were closed today for a public holiday.

--With assistance from Lilian Karunungan in Singapore, Jeanette Rodrigues in Mumbai and Fion Li in Hong Kong. Editors: Andrew Janes, Simon Harvey

%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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