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Asian Currencies Retreat, Led by Korean Won, Ringgit, on Intervention Risk
Asian currencies declined, led by South Korea’s won and Malaysia’s ringgit, on speculation central banks will seek to prevent appreciation that may hurt exports.
The Bloomberg-JPMorgan Asia Dollar Index fell for the first time in five days, retreating from a four-week high, as the ringgit and Thailand’s baht slipped from their strongest levels in 13 years. Dollar demand firmed amid concern sovereign-debt risk will hinder fund-raising by European banks.
“There’s been a big rush in the last few days” and Asian central banks may intervene, said Wai Ho Leong, a regional economist at Barclays Plc in Singapore. “Weakness in the euro is causing some profit-taking in” Asian currencies, he said.
The won weakened 0.5 percent to 1,176.39 per dollar as of 12:17 p.m. in Seoul, according to data compiled by Bloomberg. The ringgit dropped 0.2 percent to 3.1213, Indonesia’s rupiah fell 0.2 percent to 9,008 and the baht slipped 0.2 percent to 31.23. The Asia Dollar Index, which tracks the region’s 10 most- active currencies outside of Japan, retreated 0.1 percent and the euro lost 0.6 percent to trade at $1.2805.
The Association of German Banks said yesterday the nation’s 10 largest lenders may need about 105 billion euros ($134 billion) in fresh capital because of new regulations. The Wall Street Journal reported Europe’s recent “stress tests” to gauge the strength of major banks understated some lenders’ holdings of potentially risky government debt.
Curb Volatility
The won retreated from its strongest level in four weeks after policy makers were suspected of buying dollars in the foreign-exchange market yesterday, said Ha Joon Woo, a currency dealer at Daegu Bank in Seoul.
“All eyes will be trying to follow the authorities’ every move,” Ha said. “But we only see reasons for the won to continue to strengthen,” he added.
Vice Finance Minister Yim Jong Yong said in June policy makers may intervene to curb volatility in the won, which last week strengthened by 1.8 percent. The nation’s current-account surplus narrowed to about $1.5 billion in August, from a 16- month high of $5.9 billion in July, as the nation’s trade surplus shrank, the finance ministry said today.
The ringgit declined before a government report this week that may show factory output rose at the slowest pace in five months in July as overseas orders waned. Bank Negara Malaysia Governor Zeti Akhtar Aziz said on Aug. 24 that the central bank “will be there” when there are excessive and sudden movements in the ringgit market.
‘Feel the Pain’
“Some electronics exporters will feel the pain of the ringgit appreciation,” said Wan Murezani Mohamad, a senior analyst at Malaysian Rating Corp. in Kuala Lumpur. “The authorities are aware that too much of hot money inflows isn’t good for the economy.”
The ringgit has rallied 9.7 percent so far this year, the best performance among Asia’s 10 most-active currencies. Industrial production grew 5.7 percent in July from a year earlier, following a 9.4 percent increase in June, according to the median forecast in a Bloomberg News survey of economists.
The baht trimmed its gain for the past month to 2.7 percent, still Asia’s best performance. The Bank of Thailand said last week that it would take “care of volatility” and is ready to use new measures if necessary to curb currency gains.
‘Intervention Risk’
“With the baht touching a high, there is growing concern among traders and other market players about the intervention risk,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “But the basic trend remains for the baht to rise.”
Overseas funds bought $505 million more of Thai stocks than they sold last month and have invested a net $289 million this month through yesterday, according to exchange data.
“We don’t want exporters to lose competitiveness,” Bank of Thailand Governor Tarisa Watanagase said on Sept. 2. Shipments from Thailand climbed 21.2 percent in July from a year earlier, slowing from a 47.1 percent increase in June, according to central bank data.
Elsewhere, the Singapore dollar dropped 0.1 percent to S$1.3464, the Philippine peso was little changed at 44.393 and Taiwan’s dollar rose 0.1 percent to NT$31.93.
To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.
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