Bloomberg News

Asian Currencies Decline This Week on Greece, Export Slowdown

May 11, 2012

Asian currencies had their worst back-to-back weekly loss this year after a political impasse in Greece roiled global markets and official reports showed exports from China, Malaysia and the Philippines slowed.

South Korea’s won had its worst five-day drop since December while Malaysia’s ringgit and the Philippine peso slid the most in eight weeks as global funds pulled $1.1 billion out of emerging-market stocks, according to a Citigroup Inc. report citing EPFR Global data. Greece’s political leaders are yet to agree on forming a new government following a May 6 election, fueling concern the country will renege on bailout accords. French Socialist Francois Hollande, who has called austerity measures to be delayed, was elected president.

“Events in Europe continue to put risk appetite in Asia under pressure,” said Roy Teo, a currency strategist at ABN Amro Private Bank in Singapore. “The risk is still to the downside, especially with renewed worries about China’s economic growth.”

The won slumped 1.3 percent this week to 1,146.55 per dollar at the close yesterday in Seoul, the biggest loss in five months, according to data compiled by Bloomberg. The ringgit dropped 1 percent to 3.0716, the peso weakened 0.6 percent to 42.565 and Thailand’s baht fell 0.7 percent to 31.19 per dollar, the lowest since January.

The Bloomberg-JPMorgan Asia Dollar Index dropped 0.4 percent from a week ago and reached the lowest level since Jan. 18 on May 9. It lost 0.7 percent over the past two weeks, the most since December. Its 60-day historical volatility rose to 2.75 percent from 2.72 percent a week ago. The MSCI Asia Pacific Index (MXAP) of stocks plunged 4.5 percent, the biggest weekly loss since November, as JPMorgan Chase & Co. disclosed a $2 billion trading loss on synthetic credit securities.

Slowing Exports

“Overseas investors continuing to sell Korean stocks and ongoing uncertainties in Europe are limiting demand for the won,” said Hong Seok Chan, a Seoul-based currency analyst at Daeshin Economy Research Institute.

Asian currencies tumbled after government reports this week showed Malaysia’s exports unexpectedly shrank 0.1 percent in March from a year earlier while shipments from Philippines contracted 1.2 percent. China’s overseas sales grew 4.9 percent while imports rose 0.3 percent in April, both trailing economists’ forecasts.

“The weak data cast doubts on the strength of China’s domestic consumption,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd., a unit of China’s second-largest bank. The yuan may trade around 6.3 per dollar this quarter, he said.

China’s currency declined 0.07 percent to 6.3106 per dollar in Shanghai yesterday from a week ago. It touched 6.3188 yesterday, the weakest level since April 20.

Interest Rates

The Bank of Korea kept its benchmark interest rate at 3.25 percent on May 10, while Bank Indonesia maintained its reference rate at 5.75 percent. Bank Negara Malaysia kept the policy rate at 3 percent for a sixth straight meeting, the central bank said in a statement in Kuala Lumpur.

The rupee completed a sixth weekly decline. The currency pared losses after the Reserve Bank of India announced policy changes to arrest its slide toward a record low.

The Indian currency dropped 0.3 percent this week to 53.6350 per dollar in Mumbai. It fell 0.4 percent yesterday and touched 53.905 on May 10, 0.7 percent stronger than its record low of 54.305 on Dec. 15. The central bank said May 10 that exporters must convert half of their overseas earnings, with compliance set within a fortnight.

‘At The Bottom’

“We’re pretty much at the bottom in terms of the rupee and most of the bad news is in the price,” Hans Goetti, the Singapore-based chief investment officer for Asia at Finaport Investment Intelligence that oversees $1.5 billion, told Bloomberg UTV May 10. “We don’t see much of a downside risk for Indian markets from here.”

Elsewhere, Taiwan’s dollar slipped 0.4 percent to NT$29.410, snapping a four-week advance. Indonesia’s rupiah gained 0.4 percent this week to 9,240 on suspected intervention by the central bank.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net.

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


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