Bloomberg News

Won, Rupiah Lead Drop in Asia on Europe Risks; Rupee Rebounds

May 15, 2012

South Korea’s won led declines among Asian currencies as regional stocks slid on speculation slowing global growth and the European debt crisis will hurt demand for emerging-market assets.

Korea’s currency fell for a fifth day and Indonesia’s rupiah dropped to a two-year low, after Moody’s Investors Service downgraded 26 Italian banks yesterday and as Greece grapples with a political impasse. Pacific Investment Management Co., manager of the world’s biggest bond fund, said China’s economy may expand at the slowest pace in 13 years.

“The market remains very nervous given the unfavorable data outcome from China and the political uncertainties in Greece,” said Nizam Idris, head of Asia currency strategy at Macquarie Group Ltd. in Singapore. “The market tends to be sensitive to risks when dealing with Asian currencies.”

The won closed 0.4 percent weaker at a four-month low of 1,154 per dollar in Seoul, according to data compiled by Bloomberg. The rupiah lost 0.8 percent to 9,309, and touched 9,312, the lowest level since May 2010. Taiwan’s dollar was little changed at NT$29.514.

The Bloomberg-JPMorgan Asia Dollar Index of regional currencies reached the lowest since Jan. 17. Its 60-day historical volatility rose to this month’s high of 2.83 percent. The MSCI Asia-Pacific Index of stocks fell 0.6 percent as foreign investors cut their equity holdings by $3.9 billion this month in Indonesia, South Korea, Taiwan and Thailand.

Italy, Greece

Moody’s cut the ratings of 26 Italian banks by one to four levels, citing weakened earnings and the economic outlook. In Greece, President Karolos Papoulias will offer party leaders a proposal for a government of prominent non-politicians to head the country.

“The fear now is a story of contagion risk emanating from Greece,” said Enrico Tanuwidjaja, a Singapore-based senior currency analyst at Malayan Banking Bhd. (MAY)

The Philippine peso climbed 0.1 percent to 42.67 per dollar and Thailand’s baht gained 0.1 percent to 31.34. Both reversed losses after an official report showed the German economy grew 0.5 percent last quarter from the final three months of 2011. Economists predicted a 0.1 percent gain, according to the median of 40 estimates in a Bloomberg News survey.

The euro area’s gross domestic product was unchanged in the first quarter from the preceding three months, when it contracted 0.3 percent, the European Commission said today. Analysts had predicted a 0.2 percent drop.

Rupee Intervention

India’s rupee rose 0.3 percent to 53.7950 per dollar, rebounding from a five-month low, on speculation the central bank sold dollars to curb losses in Asia’s worst-performing currency this quarter. It earlier fell as much as 0.2 percent to 54.07, near the record low of 54.305 set in December.

“The central bank will likely continue intervening and regulatory measures will keep coming in,” said Priyanka Kishore, a foreign-exchange strategist at Standard Chartered Plc in Mumbai. “Tinkering with the domestic dollar supply is not the same as encouraging capital inflows, which will need a change in the global backdrop.”

The yuan rose 0.05 percent to 6.3182 per dollar in Shanghai, according to China Foreign Exchange Trade System. The central bank weakened the currency’s reference rate for a fifth day to 6.3110.

The world’s second-largest economy may grow in the “mid-7 percent range” this year, according to Ramin Toloui, Singapore- based global co-head of emerging-markets investments at Pimco. The pace of growth is unlikely to bottom out until the third quarter, he said.

Elsewhere, Malaysia’s ringgit was little changed at 3.0815 per dollar after touching a two-month low. Vietnam’s dong was unchanged at 20,850.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Kyoungwha Kim in Singapore at kkim19@bloomberg.net.

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


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