Asia Currencies Weaken on Europe Debt Crisis, ADB Growth-Outlook Downgrade
Asian currencies weakened, led by South Korea’s won, as concern the region’s economic growth is slowing and Europe’s debt crisis is worsening sapped demand for emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index dropped to its lowest level in five months after the Asian Development Bank cut its 2011 growth forecast for Asia excluding Japan today. Bank Indonesia intervened to support the rupiah after it plunged as much as 2.6 percent against the dollar. The Reserve Bank of India also stepped in to buy the rupee, a Mumbai-based trader at a state-owned bank said, declining to be identified because he isn’t authorized to speak to the media.
The won slumped 2.7 percent to 1,107.70 per dollar as of 3 p.m. in Seoul from Sept. 9, according to data compiled by Bloomberg. The rupiah weakened 1.5 percent to 8,843 from yesterday, the Philippine peso dropped 0.6 percent to 43.225 and Malaysia’s ringgit fell 0.4 percent to 3.0805. Korean financial markets were closed for the first two days of this week for public holidays.
“The European debt concern prevails in the market, which weighs on the riskier assets like the Asian currencies,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “There is concern about the economic slowdown in Asia, which adds to weak sentiment.”
The Asia Dollar Index touched 117.18, the lowest level since March 30. Manila-based ADB cut its growth projection to 7.5 percent from an April estimate of 7.8 percent. It raised the region’s inflation forecast to 5.8 percent this year, from 5.3 percent.
Bank Indonesia said it stepped in to halt losses in the rupiah today. The central bank “intervened in the rupiah and bond markets,” Deputy Governor Hartadi Sarwono said. Bank Indonesia needed to calm the market and doesn’t want the currency to fall further, he said.
India’s rupee fell 0.4 percent to 47.785 per dollar after plunging to as low as 48.01, the weakest level since September 2009. Inflation in India accelerated to 9.78 percent in August from a year earlier, the most in more than a year, data showed today. India’s industrial production rose in July at the slowest pace since 2009, a report showed this week.
The Bank of Thailand sees increased risks to global growth, which may pose a larger threat to the domestic economy than inflation, Praipol Koomsup, a member of the central bank’s monetary policy committee, said on Sept. 12.
The won reached a five-month low as markets reopened after the Chuseok holiday. Greece’s budget deficit widened 22 percent in the first eight months of the year, fanning speculation the country will fail to meet conditions for further bailout funds.
French lenders Credit Agricole SA and Societe Generale SA had their debt ratings cut by Moody’s Investors Service today because of their Greek holdings.
“The won is weakening as market sentiment worsened on the European debt crisis during Chuseok,” said Yu Won Jun, a currency dealer at Korea Exchange Bank in Seoul. “Currency losses will depend on exporters’ selling dollars to capitalize on the relatively strong dollar, and government intervention to stabilize currency movements.”
Taiwan’s dollar declined for an eighth day, the longest losing streak since February 2009, as foreign funds sold $328 million more Taiwan stocks than they bought. The currency slipped 0.5 percent to NT$29.625, according to Taipei Forex Inc.
“Lingering worries over euro zone’s debt problems seem to be weighing on investor sentiment,” said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. “This is probably causing selling of Asian currencies.”
Elsewhere, the Singapore dollar declined 0.4 percent to S$1.2477 against the greenback and the Thai baht slid 0.2 percent to 30.26, according to data compiled by Bloomberg. China’s yuan gained 0.04 percent to 6.3964.
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