Bloomberg News

Asian Currencies Weaken as Europe Saps Demand for Riskier Assets

January 09, 2012

Jan. 9 (Bloomberg) -- Asian currencies weakened, led by Indonesia’s rupiah and Malaysia’s ringgit, as concern Europe’s debt crisis will worsen prompted investors to favor assets perceived safer than those in emerging markets.

The Bloomberg-JPMorgan Asia Dollar Index fell for a fourth day before German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Berlin today to craft a plan for rescuing the euro over the next three months. Economists predict trade data this week will show Philippine exports shrank for a seventh month and Malaysian shipments rose in November at the slowest pace in three months, according to separate Bloomberg News surveys.

“Traders and investors are looking at Europe which still hasn’t gotten its act together,” said Lito Mercado, head of trading at Rizal Commercial Banking Corp. in Manila. “It will be a problem for growth, not just in Europe but globally. It will affect our own economies and currencies.”

The rupiah slumped 1.2 percent to 9,208 per dollar as of 3:34 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The ringgit and Thailand’s baht fell 0.3 percent to 3.1535 and 31.79, respectively. The Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, declined 0.1 percent.

Indonesian Rates

The Indonesian currency fell to a six-week low before the central bank, which cut borrowing costs twice last quarter to spur economic growth, reviews them again this week. Bank Indonesia will keep the reference rate unchanged at 6 percent on Jan. 12, according to 13 out of 18 analysts surveyed by Bloomberg News. Five predict a reduction to 5.75 percent.

The monetary authority sees room to reduce borrowing costs if needed, Deputy Governor Hartadi Sarwono said last week.

“Europe’s debt crisis is causing risk aversion,” said Radhika Rao, an economist at Forecast Pte in Singapore. “We are not expecting any rate cut by Bank Indonesia this quarter. The last cut was premature.”

The ringgit dropped the most in more than a week before a Jan. 11 report that may show exports rose 13.5 percent from a year earlier in November after a 15.8 percent gain the previous month, according to the median estimate of economists surveyed by Bloomberg News. Industrial production grew 3.5 percent after a 2.8 percent gain in October, a separate poll showed before data due tomorrow.

Ringgit Weakens

“I expect the ringgit to weaken to 3.40 to the greenback by the end of the first quarter,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “Demand for the dollar will be strong.”

The peso fell as much as 0.5 percent before ending little changed as a government report tomorrow may show overseas shipments dropped 10 percent in November from a year earlier, according to the median estimate of economists in a Bloomberg News survey.

Elsewhere, South Korea’s won and China’s yuan slid 0.1 percent to 1,163.65 and 6.3155, respectively, against the dollar. Taiwan’s dollar rose 0.1 percent to NT$30.205.

--With assistance from Khalid Qayum in Singapore and Elffie Chew in Kuala Lumpur. Editors: Anil Varma, Andrew Janes

%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 editor responsible for this story: James Regan at jregan19@bloomberg.net.


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