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Asian Currencies Drop on Concern Global Cooling Will Crimp Export Demand
Asian currencies declined, led by the South Korean won and Philippine peso on speculation faltering economic growth in the U.S. and Europe will crimp demand for regional exports and slow local expansion.
The Bloomberg-JPMorgan Asia Dollar Index fell for a fourth day, the longest stretch of losses since May, before reports this week that may show the Philippine economy cooled last quarter, factory output in Singapore eased in July, U.S. home sales dropped and German business confidence deteriorated. HSBC Holdings Plc, Europe’s largest lender by market value, advised clients to avoid the won and Taiwan’s dollar as monetary authorities are “strongly biased” toward weaker currencies to support overseas sales as the global economy slows.
“Although Asia’s growth is strong, their economies are largely driven by exports and a slowdown of economies in export destinations is negative for the region,” said Minoru Shioiri, chief manager of foreign-exchange trading at Tokyo-based Mitsubishi UFJ Morgan Stanley Securities Co., a unit of Japan’s largest financial group by market value. “The environment is not encouraging investors to take risks.”
The won weakened 0.7 percent to 1,189.85 per dollar as of 2:21 p.m. in Seoul, according to data compiled by Bloomberg. The peso declined 0.6 percent to 45.315 and the Singapore dollar dropped 0.3 percent to S$1.3605.
The Asia Dollar Index, which tracks the region’s 10 most- traded currencies excluding the yen, fell as much as 0.2 percent to 111.78, the lowest level in a week. South Korea’s currency reached a one-week low as global funds sold more of the nation’s shares than they bought for the first time in five days.
‘Negative Impact’
The MSCI Asia-Pacific Index of shares dropped 0.6 percent today after the Standard & Poor’s 500 Index declined for a third day yesterday.
Slower economic growth in China, India or other Asian economies would have a “serious negative impact” on Europe’s growth, according to the European Union’s economic chief.
Olli Rehn, the EU commissioner for economic and monetary affairs, said yesterday in a Bloomberg Television interview that a slowdown in the U.S. recovery and turmoil in the sovereign debt markets could also cause concern in Europe.
Gross domestic product in the Philippines likely increased 6.3 percent last quarter from a year earlier, compared with 7.3 percent growth in the previous three months, according to the median estimate in a Bloomberg survey before the report on Aug. 26. Singapore’s factory production rose 8.9 percent in July, easing from 26 percent in June, a separate survey showed before the numbers due the same day.
‘Safe-Haven Assets’
“A preference for safe-haven assets is returning after the euro dipped and stocks in New York fell due to recovery fears,” said Yun Se Min, a Seoul-based currency trader at Busan Bank.
Accumulation of foreign-currency reserves to counter appreciation is “greatest” in Taiwan’s dollar and the won, according to the HSBC report. South Korea added $11.6 billion to its reserves in July, while Taiwan bought $4 billion, the bank estimated.
The peso dropped the most in two weeks and Malaysia’s ringgit fell from a 13-year high as stocks around the region declined. The ringgit weakened 0.2 percent to 3.1380 per dollar after yesterday reaching 3.1238, the strongest level since October 1997.
Malaysia’s central bank will ensure orderly market conditions as significant volatility in international markets will continue, central bank governor Zeti Akhtar Aziz said today in Kuala Lumpur.
“The market is concerned about the slowdown, and the second-half picture is probably not going to be pretty,” said Zaki Talib, a currency trader at RHB Bank Bhd. in Kuala Lumpur. “The authorities may not want to see too fast an appreciation in the ringgit” for competitive reasons, he said.
Elsewhere, the Thai baht fell 0.1 percent to 31.51 per dollar and the Indian rupee dropped 0.3 percent to 46.77. Indonesia’s rupiah and the Taiwan dollar were little changed at 8,973 and NT$31.959, respectively.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Yumi Teso in Bangkok at yteso1@bloomberg.net.
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