Bloomberg News

Asian Currencies Fall on Europe Slowdown Concern; Peso Advances

July 05, 2012

Asian currencies fell after data indicated an economic slump is deepening in Europe, bolstering demand for the relative safety of the dollar.

India’s rupee led losses as the MSCI Asia-Pacific Index of shares snapped a six-day advance. Euro-area services and manufacturing output shrank in June for a fifth month and services unexpectedly contracted in Germany, reports showed yesterday. The European Central Bank will cut its benchmark interest rate today, according to 53 of 63 economists in a Bloomberg News survey. The Philippine peso strengthened after a sovereign-rating upgrade yesterday.

“There seems to be dollar demand as investors may want to square positions before some events like the ECB meeting,” said Disawat Tiaowvanich, a currency trader at Bangkok Bank Pcl. (BBL) “The baht is weaker after some stock selling by foreigners.”

The rupee slid 0.9 percent to 55.0050 per dollar as of 2:08 p.m. in Mumbai, while Thailand’s baht slipped 0.3 percent to 31.53 after hitting a two-week high yesterday, according to data compiled by Bloomberg. Malaysia’s ringgit fell 0.2 percent to 3.1613 and Indonesia’s rupiah dropped 0.3 percent to 9,393. The peso advanced 0.4 percent to 41.68, after touching a four-year high of 41.60 yesterday.

The Bloomberg-JPMorgan Asia Dollar Index (MXAP) fell for a second day, with its 60-day historical volatility steady at 3.51 percent. The Dollar Index, which tracks the greenback against the currencies of six major trading partners, rose 0.5 percent.

India Debt Quota

The rupee slumped after India fell short of its target at a sale of bond-investment permits to foreign investors. Global funds bought just 402.5 billion rupees ($7.3 billion) of 599 billion rupees of debt quota offered at an auction yesterday, two people familiar with the matter said. In Thailand, global funds sold $70 million more shares than they bought yesterday, exchange data show.

“Investors are still cautious on India given the state of the economy,” said Chin Loo Thio, Singapore-based senior currency analyst at BNP Paribas SA. “The fundamental concerns remain and so monetary easing in the developed economies might not directly lead to inflows into India.”

The peso bucked the regional trend after Standard & Poor’s raised the debt rating for the Philippines by a level to BB+, one step below investment grade and the highest since 2003.

‘What the Market Expected’

“It’s a confirmation of what the market expected,” said Rajeev De Mello, head of Asian fixed-income assets at Schroder Investment Management Ltd. in Singapore. “It would be positive for the currency as well as external and domestic bonds.”

The ringgit dropped for a second day before a meeting today at which all 19 economists surveyed by Bloomberg forecast Bank Negara Malaysia will keep its overnight rate at 3 percent. The decision is due at 6 p.m. in Kuala Lumpur.

The yuan declined 0.13 percent to 6.3559 per dollar as the People’s Bank of China weakened its daily fixing by 0.11 percent at 6.3193, the most since June 25.

Elsewhere, South Korea’s won rose to 1,135.15 per dollar from 1.135.70 yesterday. Taiwan’s dollar fell 0.1 percent to NT$29.89 and the Vietnamese dong was steady at 20,885.

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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