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Asian currencies weakened, led by South Korea’s won and India’s rupee, as optimism a 100 billion euro ($125 billion) bailout of Spain’s banks will stem Europe’s debt crisis faded.
Yields on Spanish and Italian bonds rose yesterday ahead of auctions in Italy this week and elections on June 17 that may determine whether Greece stays in the euro. The MSCI Asia- Pacific Index (MXAP) of regional shares dropped 0.6 percent.
“It’s clear that investors don’t believe this small step will put an end to the Europe crisis,” said Tarsicio Tong, a foreign-exchange trader at Union Bank of Taiwan in Taipei. “The U.S. dollar will stay strong for a while.”
The rupee dropped 0.4 percent to 55.9350 per dollar as of 2:19 p.m. in Mumbai, according to data compiled by Bloomberg. The won weakened 0.4 percent to 1,170.55, Malaysia’s ringgit fell 0.4 percent to 3.1840 and Taiwan’s dollar retreated 0.2 percent to NT$29.991.
Global funds have sold $1 billion more Taiwanese, South Korean and Indonesian shares than they bought this month, exchange data show, on concern Europe’s crisis will slow global growth and crimp demand for Asian exports.
Bank Indonesia held its benchmark interest rate at 5.75 percent today, while Thailand and the Philippines are also expected to leave borrowing costs unchanged this week, according to Bloomberg surveys.
The rupee fell after Standard & Poor’s warned the nation may lose its investment-grade credit rating. Slowing growth and political roadblocks threaten India’s BBB- rating, which is one level above junk, S&P said in a statement yesterday.
The won retreated from a three-week high ahead of data tomorrow that is expected to show the unemployment rate stayed at 3.4 percent in May for a third month, according to 11 economists surveyed by Bloomberg. The Kospi Index fell 0.7 percent, trimming an earlier decline of as much as 1.4 percent.
“The won weakened because of concerns over Spain, though the losses were limited as Korean exporters sold the dollar to convert overseas earnings, and the Kospi fared better than expected,” said Han Sung Min, a Seoul-based currency dealer at Busan Bank. “Uncertainties will continue until the Greek elections, limiting the won’s gains to the 1,160 level.”
Elsewhere, Thailand’s baht dropped 0.2 percent to 31.68 per dollar. China’s yuan was steady at 6.3703, Indonesia’s rupiah was little changed at 9,450, while the Vietnamese dong gained 0.2 percent to 20,940. Financial markets in the Philippines are closed for a public holiday.
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