Bloomberg News

Asian Currencies Drop a Fourth Week as EU Crisis Hurts Exports

May 25, 2012

Asian currencies fell for a fourth week, the longest stretch of losses this year, on speculation Europe’s debt crisis will stall the global economic recovery and hurt demand for the region’s exports.

Official reports this week showed China’s manufacturing probably contracted for a seventh month in May, Taiwan’s overseas shipments and factory output declined, and Malaysia grew at the slowest pace last quarter since June. India’s rupee reached a record low even after the central bank took measures to boost dollar supply to alleviate pressure on the currency.

“You still have massive problems in Europe and there are a lot of concerns about the slowdown in China,” said Thomas Harr, the Singapore-based head of Asian foreign-exchange strategy at Standard Chartered Plc. “There’s pressure on all Asian currencies at the moment.”

India’s rupee declined 1.7 percent this week to 55.3750 per dollar in Mumbai, according to data compiled by Bloomberg. The Philippine peso weakened 1.2 percent to 43.755, Thailand’s baht lost 1.1 percent to 31.69 and China’s yuan slipped 0.2 percent to 6.3439.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, dropped 0.5 percent this week and touched 114.21 yesterday, the lowest level since Dec. 15. Funds based abroad pulled $1.9 billion from equity markets in Taiwan, South Korea, Indonesia and Thailand this week, exchange data show.

China Lending

China’s biggest lenders may miss their loan targets for the first time in at least seven years as the slowdown crimps credit, according to three bank officials with knowledge of the matter, who declined to be identified because they aren’t permitted to speak publicly.

Banks’ total new loans for 2012 will be about 7 trillion yuan ($1.1 trillion), less than the government goal of 8 trillion yuan to 8.5 trillion yuan, said one of the officials.

Greece is heading for a second election on June 17 after an inconclusive vote this month ignited concern it may quit the euro. European leaders urged Greece to stick with austerity measures needed to stay in the single currency at a summit in Brussels that ended May 24. They are also discussing issuing euro-area bonds to contain the debt crisis, a plan that’s met opposition from Germany.

“The downside risks to China’s growth are greater now as European leaders can’t make progress on solving their debt problems,” said Stella Lee, president of Success Futures & Foreign Exchange Ltd. in Hong Kong. “The weak loan growth and the uncertainty in Europe are going to put yuan appreciation to a halt.”

India Currency Measures

The rupee fell to a record low of 56.3875 per dollar May 24, prompting central bank Governor Duvvuri Subbarao to say policy makers will take the required steps to curb swings in the exchange rate.

The Reserve Bank of India curbed trading in currency derivatives this month to rein in volatility. It also moved to boost the supply of dollars by cutting the amount of overseas earnings companies can hold in foreign currency to 50 percent from 100 percent.

“Investors are risk-averse and stock markets and Asian currencies can still test the weaker side,” said Nalin Chutchotitham, a Bangkok-based analyst at Kasikornbank Pcl. (KBANK)

Elsewhere, South Korea’s won fell 1.1 percent this week to 1,185.43 per dollar. Malaysia’s ringgit dropped 0.6 percent to 3.1535 and earlier touched 3.1736, the lowest since Jan. 3. Taiwan’s dollar weakened 0.1 percent to NT$29.650, while Indonesia’s rupiah slid 1.3 percent to 9,474.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net.

To contact the editor responsible for this story: Ven Ram at vram1@bloomberg.net


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