Asia Currencies Drop Most Since September as European Crisis Slows Growth

Asian currencies had their biggest weekly loss since September on signs economic growth is faltering as European policy makers struggle to contain the region’s debt crisis.

The Bloomberg-JPMorgan Asia Dollar Index fell for a third week. South Korea’s won and India’s rupee led declines after data this month showed manufacturing slowed in China and Japan and exports slumped in Singapore and the Philippines. Singapore and Thailand have trimmed growth forecasts this quarter and Indonesia unexpectedly cut interest rates by half a percentage point last week.

“The uncertainty that has been endemic from the turn of the year will continue to persist into year-end, especially with a resolution to the euro zone’s crisis appearing to be a long way off,” Mitul Kotecha, head of global currency strategy at Credit Agricole CIB in Hong Kong, wrote in a report released yesterday. “Commodities and emerging-market currencies will remain under pressure” in the short term, he wrote.

The won dropped 1.1 percent this week to 1,139.13 per dollar in Seoul, according to data compiled by Bloomberg. The rupee slid the most in eight weeks, losing 2.4 percent to 51.335, and Indonesia’s rupiah weakened 0.6 percent to 9,020.

Asian equities fell for a third week, tracking losses in global markets, after borrowing costs jumped in Spain and France. New York-based Fitch Ratings said in a Nov. 16 statement that the outlook for the U.S. banking industry could worsen without a timely resolution of European government finances.

Falling Exports

Singapore’s dollar fell 0.4 percent to $1.2953 against its U.S. counterpart. Exports fell 16.2 percent in October from a year earlier, the worst performance in 30 months, the government said Nov. 17. Shipments shrank 27 percent in the Philippines, the most since April 2009.

The global economy and financial system are at their most fragile state since the 2008 crisis, the Monetary Authority of Singapore said in a report yesterday. The immediate outlook is characterized by a high degree of uncertainty, it said.

Thailand’s baht declined 0.5 percent to 30.99 per dollar. The worst floods in almost 70 years have thumped consumer confidence, which dropped to a decade-low of 62.8 in October, according to data from the University of the Thai Chamber of Commerce.

“The final quarter growth numbers are almost set to show contraction and that’s what the market is going to be looking for,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore.

Forecasts Trimmed

India’s rupee weakened beyond 51 per dollar yesterday, a level last seen in March 2009. Industrial production grew 1.9 percent in September, the least in two years, data showed on Nov. 11. The Reserve Bank of India may intervene to smooth rupee volatility, Deputy Governor Subir Gokarn told CNBC-TV18 television channel Nov. 17.

“Investors and traders are finding safety only in the dollar,” said Vikas Babu, a Mumbai-based currency trader at state-owned Andhra Bank. “The European situation and economic growth concerns are going to exert more pressure on the rupee in the medium term.”

Indonesia cut its 2012 growth forecast this week to 6.5 percent from 6.7 percent. The Philippines lowered its 2011 growth forecast to between 4.5 percent and 5.5 percent last month, down from the previous estimate of 5 percent to 6 percent. The Bank of Thailand cut its 2011 forecast to 2.6 percent from 4.1 percent.

China’s yuan fell 0.2 percent to 6.3554 per dollar in Shanghai for a second weekly loss. The currency may face depreciation in two years as China’s trade surplus may account for less than 1.6 percent of gross domestic product this year, Li Daokui, a central bank adviser said in Beijing yesterday.

Elsewhere, Malaysia’s ringgit weakened 0.4 percent to 3.1608 per dollar, Taiwan’s dollar dropped 0.2 percent to NT$30.257 and the Philippine peso declined 0.2 percent to 43.382.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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

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