Bloomberg News

Rupiah Leads Weekly Decline in Asia Currencies on Europe Concern

January 06, 2012

Jan. 6 (Bloomberg) -- Indonesia’s rupiah and South Korea’s won led declines in Asian currencies this week on speculation investors will favor safer assets than those in emerging markets as Europe struggles to contain its debt crisis.

The Bloomberg-JPMorgan Asia Dollar Index fell for a second week after France’s borrowing costs rose at a debt auction yesterday. The MSCI Asia Pacific Index of shares lost 1.9 percent after Greek Prime Minister Lucas Papademos said Jan. 4 the economy could collapse as early as March if the country doesn’t accept income cuts needed to secure foreign aid. Asian currency losses were limited after data showed hiring by private employers in the U.S. beat economists’ estimates.

“Asian currencies have been under downward pressure on Europe’s lingering debt crisis,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp. in Bangkok. “We have seen solid U.S. data, which lends some support.”

The rupiah slumped 1.5 percent this week to 9,208 per dollar as of 3:34 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. South Korea’s won weakened 0.9 percent to 1,162.75 and the Philippine peso dropped 0.7 percent to 44.138. Thailand’s baht slid 0.2 percent to 31.63.

France sold 10-year bonds at an average yield of 3.29 percent at yesterday’s auction, up from 3.18 percent on Dec. 1. In the U.S., private employers added 325,000 workers to payrolls in December, according to figures released yesterday. That was the biggest increase in records going back to 2001 and exceeded the highest estimate in a Bloomberg News survey of 38 economists.

Indonesia Rates

The rupiah dropped for a third week on speculation the central bank will cut interest rates after official data showed the inflation rate fell to a 21-month low of 3.79 percent in December. Bank Indonesia, which cut its benchmark reference rate by a total 75 basis points last quarter to 6 percent, is due to next review it on Jan. 12. The monetary authority sees room to reduce borrowing costs if needed, Deputy Governor Hartadi Sarwono said in Singapore yesterday.

“Another rate cut of 25 basis points to 50 basis points is expected in the first quarter,” said Wiwig Santoso, head of treasury and markets at PT Bank DBS Indonesia in Jakarta.

The won’s losses were partly driven by “investors demanding the dollar after rumors today on North Korea,” according to Lee Jin Ill, a Seoul-based senior currency dealer with Hana Bank.

South Korea’s Financial Supervisory Service said today it was investigating talk spreading through markets that an explosion had occurred in North Korea.

Peso, Yuan

The peso dropped for a second week as government figures showed inflation eased to an 11-month low last month, boosting scope for an interest-rate cut.

Annual inflation in the Philippines was 4.2 percent last month, compared with 4.8 percent in November, official data showed yesterday. The report added to confidence that price pressures will be manageable, central bank Governor Amando Tetangco said yesterday in a mobile-phone message. The monetary authority has room to reduce borrowing costs and may review the benchmark rate and banks’ reserve-requirement ratios at a meeting on Jan. 19, Tetangco told reporters.

The yuan headed for its first weekly drop since the five days through Dec. 9 on signs policy makers are limiting gains to protect export growth. The People’s Bank of China set the fixing 0.08 percent weaker at 6.3166 per dollar today after Commerce Minister Chen Deming said the government will unveil measures to boost consumption this year. The yuan fell 0.3 percent this week to 6.3095 per dollar.

‘Buying Time’

“They are buying time to slow yuan appreciation but not to engineer depreciation,” said Nizam Idris, a currency strategist at Macquarie Group Ltd. in Singapore. “We could see a slower pace of appreciation in the months ahead until a soft landing in the Chinese economy is achieved.”

India’s rupee was set for its first weekly gain in a month on speculation foreign funds will step up purchases of local assets. The nation’s government said on Jan. 1 it will allow overseas individual investors to directly buy local equities. Foreign funds boosted local stock holdings by $102 million this week through Jan. 4, exchange data show. The rupee gained 0.5 percent this week to 52.78.

Elsewhere, Taiwan’s dollar climbed 0.2 percent to NT$30.245, Singapore’s currency advanced 0.2 percent to S$1.2940 and the ringgit strengthened 0.7 percent to 3.1510.

--With assistance from Kyoungwha Kim in Singapore, Jeanette Rodrigues in Mumbai, and Clarissa Batino in Manila. Editors: Anil Varma, James Regan

%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; Khalid Qayum in Singapore at kqayum@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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