Bloomberg News

Asian Currencies Decline on Signs Europe Crisis Hurting Exports

August 16, 2012

India’s rupee led declines in Asian currencies on concern Europe’s debt crisis will hurt global growth and the region’s exports.

The Bloomberg-JPMorgan Asia Dollar Index fell for a fifth day after India, Indonesia, South Korea and Taiwan reported this month that overseas sales shrank. Thailand’s shipments dropped 2.7 percent in July after a 4.24 percent slide in June, a Bloomberg survey of economists showed before an official report next week. Figures released this week showed euro-zone gross domestic product contracted 0.4 percent in the second quarter.

“If you look at the economic data from the euro zone, they have been still sliding, and so, we are still going to see some weakness in Asian exports in coming months,” said Nalin Chutchotitham, a Bangkok-based analyst at Kasikornbank Pcl. (KBANK)

The rupee weakened 0.4 percent from Aug. 14 to 55.8750 per dollar as of 2:28 p.m. in Mumbai, according to data compiled by Bloomberg. South Korea’s won fell 0.4 percent to 1,134.15 from Aug. 14. Financial markets in the two countries were closed yesterday for public holidays. Taiwan’s dollar declined 0.1 percent to NT$30.020 and the Philippine peso depreciated to 42.285 from 42.270 yesterday.

The Asia Dollar Index, which tracks the region’s most active currencies, has retreated 0.5 percent from an almost three-month high of 115.73 reached on Aug. 9.

The rupee fell to the lowest level in almost two weeks on concern the nation’s current-account deficit will widen from a record as exports contract.

India Inflation

Merchandise shipments declined 14.8 percent in July, the biggest drop in 35 months, while imports slid 7.6 percent, Director General of Foreign Trade Anup Pujari said on Aug. 14. That left a trade deficit of $15.5 billion. The rupee also weakened on concern the fastest inflation among the largest emerging markets leaves little room for policy measures to stimulate growth, according to Edelweiss Financial Advisors Ltd.

The shortfall in India’s current account, the broadest measure of trade, widened to a record 4.2 percent of gross domestic product in the year through March 2012 from 2.7 percent in the previous 12 months, according to the central bank.

“A widening trade deficit highlighted the woes facing the local currency,” analysts at Edelweiss, including Mumbai-based Vinay Khattar, wrote in a research report today. “The current- account deficit remains a particular source of concern.”

Yuan Fixing

China’s yuan dropped for a second day as the central bank weakened its daily fixing to the lowest level since November to help exporters. The currency fell 0.05 percent to 6.3658 per dollar in Shanghai.

The People’s Bank of China reduced the reference rate by 0.02 percent to 6.3495 per dollar, the least since Nov. 29, after the Dollar Index climbed 0.2 percent yesterday. Premier Wen Jiabao said there’s “growing room for monetary-policy operations,” during a two-day visit to the eastern province of Zhejiang, according to a report on state television.

“China will keep the yuan weaker to alleviate pressure on exporters,” said Daniel Chan, executive vice president at Glory Sky Global Markets Ltd. in Hong Kong. “There’s no surprise in what Wen said. More aggressive easing is just a matter of timing and investors are waiting for genuine actions.”

The Philippine peso touched a seven-week low of 42.43 per dollar on signs the government favors a weaker currency and after growth in remittances slowed.

Slowing Remittances

Funds sent home by Filipinos living abroad rose 4.2 percent in June from a year earlier, the least in 15 months, the central bank reported yesterday. The government said this week it’s looking at raising money in a way that won’t fuel gains in the currency that would hurt exporters. Overseas sales and remittances account for about 30 percent of the $225 billion economy.

“The market is cognizant that the bias of the monetary authority is for the peso to move in line with regional currencies,” said Roland Avante, president of Philippine Business Bank in Manila.

Elsewhere, Thailand’s baht was little changed against the dollar at 31.54. Malaysia’s ringgit advanced 0.1 percent to 3.1294 and Indonesia’s rupiah added 0.1 percent to 9,503.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

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


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