Bloomberg News

Asia Currencies Drop as Europe Debt Crisis Clouds Export Outlook

January 12, 2012

Jan. 12 (Bloomberg) -- Asian currencies weakened, led by Thailand’s baht, as concern a sovereign-debt crisis will pull Europe into a recession dimmed the outlook for exports.

The Bloomberg-JPMorgan Asia Dollar Index dropped for a second day and the baht sank to a 17-month low. The MSCI Asia- Pacific Index of shares declined as Spain and Italy prepare to sell more debt amid credit-rating concerns. Data today is forecast to show industrial output in the euro region shrank for a third month in November.

“Concern over Europe’s debt crisis is intensifying, making it hard for investors to take risks,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “Such concern also hurts the outlook for Asian exports, weighing on currencies.”

The baht slid 0.3 percent to 31.85 per dollar as of 4:03 p.m. in Bangkok, according to data compiled by Bloomberg. The Philippine peso lost 0.1 percent to 44.045 while South Korea’s won closed little changed at 1,158.20.

Industrial production in the euro region contracted 0.3 percent in November from the previous month, according to the median forecast in a Bloomberg News survey before the European Union’s statistics office releases the figures.

The European Central Bank will keep its benchmark interest rate at 1 percent at a policy meeting today, a separate survey showed. Ewald Novotny, an ECB governing council member, said on Jan. 10 there’s a risk of a “mild recession” in the euro area.

Debt Sales

Spain will auction as much as 5 billion euros ($6.4 billion) of bonds due 2015 and 2016 today, while Italy is scheduled to sell 12 billion euros of bills. Fitch Ratings lowered its rating outlook for France in December and put Spain and Italy on review for a downgrade.

“Ahead of big events like auctions in Italy and Spain and also the central bank’s rate meeting at home, traders don’t want to go for sizable positions,” said Lee Jung Hyun, a Seoul-based currency dealer at Industrial Bank of Korea.

The rupiah fell as much as 0.7 percent to 9,225 per dollar as Bank Indonesia kept its reference rate at 6 percent at its policy meeting today, a move predicted by 13 of 18 economists in a Bloomberg survey. Five had forecast a cut to 5.75 percent.

The won earlier fell as much as 0.2 percent. The Bank of Korea is expected to keep its benchmark rate at 3.25 percent for a seventh month at its policy meeting tomorrow, based on all 14 estimates in a Bloomberg poll.

China Inflation

Reports this week showed Malaysia’s exports and industrial production grew in November at the slowest pace in four months, while Philippine exports dropped for a seventh month. China and Taiwan released December trade figures showing the smallest gains in shipments since 2009.

China’s yuan weakened for a seventh day, the longest losing streak since 2006, as government data today showed inflation slowed for a fifth month. The currency declined 0.04 percent to 6.3178 per dollar, contributing to a 0.38 percent loss since December. A 0.48 percent drop in August 2010 was the biggest monthly slide since January 1994.

Consumer prices rose 4.1 percent in December from a year earlier, the National Bureau of Statistics said in Beijing today. That compares with the median estimate of 4 percent in a Bloomberg News survey of 26 economists and a gain of 4.2 percent in November.

India Production

India’s rupee strengthened as a government report showed industrial production increased 5.9 percent in November from a year earlier, rebounding from a 5.1 percent drop in October. Economists forecast 2.1 percent gain in a Bloomberg News survey. The currency rose 0.2 percent to 51.7875 per dollar.

“I’m not as bearish on India now as I was in November,” said Jonathan Cavenagh, a strategist in Singapore at Westpac Banking Corp. “Growth is not a huge concern, and if the inflation story can improve then it will be a good opportunity to buy the rupee.”

The Reserve Bank of India sold $2.92 billion of foreign currencies in November as the rupee slumped, according to data published by the central bank on its website. That compares with sales of $943 million in October.

Elsewhere, the Malaysian ringgit declined 0.1 percent to 3.1440. Taiwan’s dollar was little changed at NT$30.002, after earlier touching NT$29.88, the strongest level since Nov. 1.

--With assistance from Kyoungwha Kim in Beijing and Jeanette Rodrigues in Mumbai. Editors: James Regan, Anil Varma

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net

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


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