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Korea's Won, Rupee Lead Asian Currencies Lower This Week as Growth Cools
South Korea’s won and the Indian rupee led declines in Asian currencies this week as investors sought the relative safety of the dollar as economic reports fanned concern the global recovery is losing momentum.
The won dropped the most in nine weeks and the rupee was set for its biggest drop since May. The Federal Reserve this week said the U.S. recovery is likely to be “more modest” than anticipated, while China and India reported the smallest gains in industrial output in about a year. The Dollar Index rallied, headed for its first weekly advance in more than two months.
“It seems like every part of the world is showing signs of a slowdown and risk aversion is driving Asian currencies lower,” said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong.
South Korea’s won fell 2.9 percent this week to 1,189.50 per dollar in Seoul, according to data compiled by Bloomberg. The rupee declined 1.3 percent to 46.76. Singapore’s dollar lost 1.2 percent to S$1.3630 and Malaysia’s ringgit slid 0.6 percent to 3.1688.
Funds based abroad sold more shares this week than they bought in South Korea and Taiwan, driving this year’s net inflows to the two markets below the $10 billion mark. The MSCI Asia-Pacific Index of regional equities slumped 3.7 percent from Aug. 6, its worst week in almost three months.
Yuan Drops
The Dollar Index, which tracks the currency against six major trading partners, rallied 3.1 percent this week, the biggest gain since the period ended May 7.
China’s yuan had its biggest weekly decline in 20 months on speculation the central bank is tempering gains in the currency to protect exports. Traders pared bets for future appreciation in the yuan after government data showed growth in overseas sales eased in July, industrial output grew at the slowest pace in 11 months, and bank lending increased by the least since March.
“It’s clear Beijing doesn’t want to see appreciation bring more troubles to the economy,” said Ken Peng, a Beijing-based economist for Citigroup Inc.
The yuan declined 0.4 percent to 6.7957 per dollar from 6.7683 on Aug. 6 in Shanghai, according to the China Foreign Exchange Trade System. That was the biggest weekly drop since December 2008.
‘Bad News’
Hong Kong reported yesterday that gross domestic product increased 6.5 percent in the second quarter, less than the 8.2 percent gain recorded for the previous three months. The Bank of Korea a day earlier refrained from adding to last month’s interest-rate increase, citing concern about slowing growth in the major economies of the world.
“All the economic data this week weren’t encouraging,” said Yang Kung-yi, a foreign-exchange trader at Shanghai Commercial & Savings Bank in Taipei. “Investors are waiting for this wave of bad news to pass. Risk appetite is not really there at the moment.”
Elsewhere, Taiwan’s dollar lost 0.6 percent to NT$31.940 against the U.S. currency this week, Indonesia’s rupiah fell 0.4 percent to 8,975 and the Philippine peso slipped 1 percent to 45.305.
To contact the reporter on this story: Patricia Lui at plui4@bloomberg.net;
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