Asia Currencies Weaken, Led by Rupee, as Europe Debt Woes Curb Risk-Taking

Asian currencies declined, led by Malaysia’s ringgit and India’s rupee, as concern Europe’s debt crisis will worsen deterred risk-taking, making it harder for emerging markets to attract funds.

The Bloomberg-JPMorgan Asia Dollar Index dropped for a third day as Italian Prime Minister Silvio Berlusconi faces a budget vote today that will determine whether he has the support needed to deliver on austerity measures pledged to the European Union. Thailand’s worst floods in almost 70 years have inundated seven industrial estates with 891 factories, according to the Thai Industrial Estate and Strategic Partners Association, raising concern global supply chains will be disrupted.

“Italy is a much bigger economy and a bigger threat to the euro-zone than Greece,” said Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB. “Asian countries’ exports will also be disrupted by Thailand’s floods, hence damaging growth.”

The ringgit slumped 0.5 percent to 3.1290 per dollar as of 4:30 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The rupee slid 0.5 percent to 49.3625. Financial markets in Malaysia and India were closed yesterday for holidays. South Korea’s won fell 0.4 percent to 1,121.10.

A Nov. 10 report is expected to show Philippines’ overseas sales decreased 19.3 percent in September from a year earlier after having fallen 13.7 percent the previous month, according to the median estimate of economists in a Bloomberg survey. China will say the same day its export growth slowed to 16.1 percent last month from a 17.1 percent pace in September, a separate poll shows.

Malaysia Rate Decision

Malaysia’s central bank will leave its benchmark overnight rate unchanged at 3 percent on Nov. 11, according to 16 of 17 economists surveyed by Bloomberg. One forecast a reduction of a quarter of a percentage point.

“The risk-on seen in the market is looking very false in nature,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “The ringgit is still looking weak and could reach 3.15 this week.”

The rupee dropped for the first time in four days on concern higher crude prices will widen the nation’s current- account deficit.

Oil traded near the highest level in three months in New York on speculation Europe’s efforts to tame its debt crisis and shrinking supplies in the U.S. will lead to higher demand for the fuel. India’s current-account deficit could widen, from 2.6 percent of gross domestic product in the fiscal year through March 2011, if oil prices continue to push up the import bill, the central bank said last month.

Korea Rating Outlook

The won fell, erasing earlier gains, as concern Europe’s debt crisis will worsen countered a Fitch Ratings upgrade of the outlook on South Korea’s debt rating.

Fitch raised the outlook to “positive” from “stable,” and affirmed the A+ grade, citing foreign-exchange reserves of $311 billion as well as “moderate public debt and long-standing fiscal prudence,” according to an e-mailed statement yesterday.

“The effect of Fitch’s outlook upgrade was limited as market players reacted more to Europe debt issues,” said Han Sung Min, a Seoul-based currency dealer with Busan Bank. “Importers buying dollar to settle bills and Kospi Index declines helped weaken the won.”

Elsewhere, the Thai baht gained 0.1 percent to 30.72 per dollar and Indonesia’s rupiah was little changed at 8,955, according to data compiled by Bloomberg. Taiwan’s dollar held steady at NT$30.106, while China’s yuan gained 0.1 percent to 6.3462.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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