Bloomberg News

Asia Currencies Decline on China’s Slowdown, Greek Debt Concern

July 23, 2012

Asian currencies weakened after a central bank adviser forecast China’s economy will slow further and concern mounted that Greece won’t meet bailout targets, sapping demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index fell by the most in more than a week after Song Guoqing, an academic member of the People’s Bank of China monetary policy committee, said on July 21 that economic expansion may cool for a seventh quarter to 7.4 percent in the three months through September. German Vice Chancellor Philipp Roesler said yesterday he’s “very skeptical” that European leaders will be able to rescue Greece.

“Risk sentiment is relatively weak today and is largely influenced by external factors,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Many Asian nations depend on exports, so external concerns are weighing on the regional currencies.”

India’s rupee slumped 1 percent to 55.9012 per dollar as of 1:48 p.m. in Mumbai, according to data compiled by Bloomberg. Malaysia’s ringgit dropped 0.7 percent to 3.1734, South Korea’s won declined 0.5 percent to 1,146.55 and Thailand’s baht weakened 0.3 percent to 31.76. The Asia Dollar Index lost 0.3 percent to 114.65, with its 60-day historical volatility at 3.71 percent from 3.66 percent on July 20.

China is the biggest export market for South Korea, Taiwan and Thailand and the second-largest for Malaysia. Overseas sales account for about two-thirds of Taiwan and Thailand’s economies and about half of Korea’s.

Thai Exports

Thailand may report on July 25 that export growth slowed to 4.5 percent last month from 7.7 percent in May, based on the median estimate of economists in a Bloomberg survey. South Korea may say a day after that its economy expanded 2.5 percent in the second quarter, compared with a 2.8 percent pace in the previous three months, according to a separate Bloomberg poll.

The won weakened for a second day as the benchmark Kospi (KOSPI) index of shares lost 1.8 percent, the most since July 12.

“Europe’s debt crisis still remains a cause of worry for global markets,” said Kim Sung Soo, chief currency dealer at Industrial Bank of Korea in Seoul. “The slide in stock markets points to where the currencies are headed. Month-end exporter deals, however, may help put a floor under the won.”

China’s yuan declined to the lowest level since October as the central bank weakened the daily reference rate by 0.25 percent, the most since June 25. The currency’s exchange rate is “very close” to equilibrium as foreign-exchange reserves are stable, Yi Gang, head of the State Administration of Foreign Exchange, said in Beijing on July 21. The yuan fell 0.21 percent to 6.3871 per dollar today, taking its decline this month to 0.52 percent.

Chinese Rebound Expected

“It’s a risk-off move and China has set a weaker fixing to accommodate the yuan spot’s decline,” said Eddie Cheung, an analyst at Standard Chartered Plc in Hong Kong. “We still expect a rebound in the economy in the second half as policy makers have the tools to stimulate growth.”

The ringgit fell by the most in a month. The economy will grow 4.2 percent this year and 4.7 percent in 2013, the Malaysian Institute of Economic Research said July 17, after Prime Minister Najib Razak said the same day the country must have expansion of 5 percent to 6 percent annually to avoid facing “many problems”.

“The negative headlines in the euro zone caused the dollar to strengthen across the board,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “China’s slowing economic growth is still a lingering concern.”

Elsewhere, the Philippine peso dropped 0.5 percent to 42.058 per dollar and the Taiwan dollar declined 0.3 percent to NT$30.095. Indonesia’s rupiah fell 0.1 percent to 9,460 and the Vietnamese dong was little changed at 20,853.

To contact the reporter on this story: 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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