South Korea’s won and India’s rupee declined the most among Asian currencies this week on concern China’s economic slowdown and Europe’s debt crisis will deter investors from buying emerging-market assets.
Goldman Sachs Group Inc. lowered China’s growth forecast for this year in a research report yesterday. Confidence among U.S. consumers sank more than economists forecast this month, while household spending and wages in Japan declined in May, according to reports this week. The MSCI Asia Pacific Index fell 3.4 percent this week, the most since the period ended May 21.
“The bottom line is, risk indicators are still high,” said Mitul Kotecha, the Hong Kong-based head of global foreign- exchange strategy at Credit Agricole CIB. “We’re still in a consolidation phase.”
The won fell 1.1 percent this week to close at 1,228.75 per dollar in Seoul. The rupee declined by as much, completing the worst week in more than a month, to 46.79, after a central bank report on June 30 showed the nation’s current-account deficit widened to a record. Taiwan’s dollar weakened 0.3 percent to NT$32.278 on signs the central bank intervened to help exporters.
Goldman economists Yu Song and Helen Qiao said they lowered China’s 2010 economic growth forecast to 10.1 percent, from 11.4 percent. Consumers in China and the U.S. are the biggest overseas buyers of South Korean goods.
The Reserve Bank of India said the current account, a measure of trade and investment flows, posted a $13 billion shortfall last quarter, more than twice the $5.75 billion median estimate of economists surveyed by Bloomberg News. The nation has become more vulnerable to global slowdowns and financial crises as foreign trade plays a bigger role in the economy, the bank said in a separate report on July 1.
“There are near-term weakening pressures on the rupee, exacerbated by external uncertainties,” Pranjul Bhandari and Tushar Poddar, Mumbai-based analysts at Goldman Sachs, wrote in a research note. “We believe the current-account deficit will remain high this fiscal year. On a six- to 12-month horizon, however, we expect higher growth and rates to drive inflows and appreciation of the rupee.”
Malaysia’s ringgit gained 0.3 percent yesterday and strengthened 0.8 percent this week to 3.2250 per dollar.
The country’s exports climbed at an annual rate of 21.9 percent in May, after rising 26.6 percent in April, the trade ministry said in a statement in Kuala Lumpur yesterday. The ringgit was Asia’s best-performing currency this week, excluding the yen.
“The recovery story is one of the drivers for the ringgit, the other being the general interest-rate advantage in Asia,” said Tan Voon Ching, a currency trader at OSK Investment Bank Bhd. in Kuala Lumpur. “While talk of a slowdown may be intensifying, regional economic conditions are relatively better than in Europe or the U.S. for now.”
Yuan forwards completed a fourth weekly gain. Twelve-month non-deliverable forwards jumped 0.2 percent to 6.6690 per dollar and strengthened 0.14 percent in the week. The contracts reflect bets that the yuan will appreciate 1.5 percent in one year. The central bank yesterday set the reference rate for yuan trading at 6.7720, 0.2 percent stronger than the previous day’s fixing.
“What has been happening in the past two weeks is a gradual move down in the dollar-yuan but the NDFs have not priced this in,” said Mirza Baig, a Singapore-based currency strategist at Deutsche Bank AG, the world’s largest foreign exchange trader. “They are cheap.”
Spain sold 3.5 billion euros ($4.4 billion) of five-year bonds at an auction on July 1, reaching the maximum sale target. The Dollar Index tumbled 1.7 percent after reports on U.S. manufacturing, employment and home sales signaled slower growth in the second half of 2010.
Thailand’s baht, which was little changed this week, was at 32.41 per dollar yesterday. Central bank data this week showed Thailand had a current-account surplus of $1.04 billion in May, compared with an April deficit of $423 million. Exports rose the most since July 2008.
Elsewhere, Indonesia’s rupiah rose 0.1 percent this week to 9,063, for its third weekly gain. The Philippine peso traded at 46.49 against the dollar and was down 0.1 percent from June 25.