Bloomberg News

Rupee, Baht Drop the Most in Asia This Week on ECB, Fed Inaction

August 03, 2012

India’s rupee and the Thai baht dropped the most among Asian currencies this week as some investors deemed policy makers in Europe and the U.S. aren’t doing enough to revive global economic growth.

European Central Bank President Mario Draghi signaled on Aug. 2 that the monetary authority intends to join forces with governments to buy bonds to ease the crisis, while conceding that Germany has reservations. The Federal Reserve a day earlier stopped short of suggesting it’s about to embark on a third round of asset purchases.

“The market’s move has a lot to do with the ECB,” Philip Wee, a senior currency economist in Singapore at DBS Group Holdings Ltd., said yesterday. “It’s been a week of hope that central banks can come up with something. There was definitely disappointment.”

The rupee dropped 0.7 percent to 55.755 per dollar this week in Mumbai, according to data compiled by Bloomberg. The baht fell 0.1 percent to 31.56, the most since the five days ended June 22. Indonesia’s rupiah was little changed at 9,468.

The Bloomberg-JPMorgan Asia Dollar Index (DXY) was at 115.52 yesterday, compared with 115.21 on July 27. The Dollar Index, which tracks the greenback against the currencies of its six major trading partners, dropped 0.4 percent this week.

China Manufacturing

Taiwan’s dollar, South Korea’s won and Malaysia’s ringgit trimmed weekly gains after reports showed manufacturing and services in China grew at a slower pace in July than the previous month, damping the outlook for exports to the world’s second-largest economy.

Taiwan’s currency dropped 0.1 percent yesterday to NT$30.002 per dollar and was up 0.3 percent from July 27, according to prices from Gretai Securities Market. The won declined 0.3 percent to 1,134.85 for a five-day gain of 0.3 percent and the ringgit fell 0.1 percent to 3.1279, paring its weekly advance to 0.9 percent, data compiled by Bloomberg show.

“China’s condition remains sluggish,” said Shigehisa Shiroki, chief trader on the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “It’s hard to be aggressively buying Asian currencies until China recovers.”

Government reports in South Korea this week showed factory output shrank in June from May, and a slump in exports worsened in July. In Indonesia, overseas sales dropped 16.4 percent in June, the biggest decrease since September 2009, resulting in a trade shortfall of 1.3 billion, official data showed Aug. 1.

“There will be no meaningful improvement in the trade balance without a rebound in commodity prices, which is unlikely in the near term,” said Eugene Leow, an economist at DBS Group in Singapore. “The global situation is still dicey, so capital flows to finance the current-account deficit will be volatile.”

Elsewhere, the Philippine peso advanced 0.1 percent this week to 41.855 per dollar. China’s yuan gained 0.1 percent to 6.3727 and was down 0.08 percent yesterday. Vietnam’s dong was little changed at 20,858 from July 27.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

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


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