Korea’s Won Leads Drop in Asian Currencies on Europe Debt, Growth Concerns
South Korea’s won led declines among Asian currencies on concern Europe’s debt crisis and the slowing global economy will sap export demand.
The Bloomberg-JPMorgan Asia Dollar Index dropped before European leaders meet today in Brussels in an attempt to escalate their response to the crisis that has led to bailouts of Greece, Ireland and Portugal. Taiwan’s exports rose 1.3 percent in November from a year earlier, official data showed today. The median estimate of 14 economists surveyed by Bloomberg News was for an 8.6 percent gain. A report today showed Japan’s machinery orders unexpectedly fell 6.9 percent in October from a month earlier.
“The global economy is not stable,” said Henry Lin, a Taipei-based foreign-exchange trader at Taiwan Shin Kong Commercial Bank. “Exports will slow down. Investors want to hold the U.S. dollar which has more liquidity.”
The won weakened 0.5 percent to close at 1,131.43 per dollar in Seoul, according to data compiled by Bloomberg. Singapore’s dollar dropped 0.4 percent to S$1.2887 and Malaysia’s ringgit fell 0.1 percent to 3.1315.
The Bank of Korea left borrowing costs unchanged at 3.25 percent for a sixth month today, saying in a statement after the rate review that “in terms of the upside and downside risks to the future growth path, the downside dominates.” The decision was predicted by all 16 economists surveyed by Bloomberg.
“Investors are aware that it will be difficult for Europe’s leaders to announce policies that will surprise the market,” said Sam Hong, senior vice-president in charge of currency strategy at Shinhan Bank in Seoul. “The Bank of Korea’s rate decision didn’t affect the market as investors were expecting the rate to be held.”
‘Investors are Cautious’
Indonesia’s central bank kept its benchmark interest rate unchanged at 6 percent today, after unexpectedly slashing it by 50 basis points last month. Seventeen of 22 economists surveyed by Bloomberg predicted the decision. The rupiah appreciated 0.9 percent to 8,998 per dollar, according to prices from local banks compiled by Bloomberg.
“There was somewhat of a consensus that the central bank would keep the rate unchanged,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “One of the reasons for the Bank Indonesia decision could be that it doesn’t want the rupiah to weaken.”
China’s yuan gained for the first time in four days as the central bank raised the currency’s reference rate by the most this week. The People’s Bank of China set the daily fixing 0.04 percent stronger at 6.3319 per dollar, 0.5 percent higher than the currency’s close yesterday.
Stronger Yuan Fixing
“The stronger fixing sends signals to the market that yuan depreciation is not on the agenda,” said Banny Lam, a Hong Kong-based economist at CCB International Securities Ltd., a unit of China’s second-largest bank. “Investors are buying the yuan as they see the rate is now more favorable. Concerns over economic growth remain so the gain could be limited.”
The yuan rose 0.04 percent to 6.3619 per dollar, according to the China Foreign Exchange Trade System. The currency is allowed to fluctuate as much as 0.5 percent on either side of the PBOC’s fixing.
Elsewhere, Thailand’s baht advanced 0.1 percent to 30.78 per dollar. Taiwan’s dollar, India’s rupee and the Philippine peso were little changed at NT$30.179, 51.7375 and 43.275, respectively.
To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net Lilian Karunungan in Singapore at lkarunungan@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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