Ringgit Leads Losses in Asian Currencies on Europe Debt Concern

Asian currencies fell, led by Malaysia’s ringgit, on concern discord among European leaders will stall efforts to contain their region’s debt crisis, aggravating a worldwide economic slowdown.

The Bloomberg-JPMorgan Asia Dollar Index snapped a three- day gain on concern demand for emerging-market assets will weaken after German Chancellor Angela Merkel and French President Francois Hollande clashed over the weekend on a timetable to introduce joint oversight of Europe’s banks. A Chinese manufacturing survey last week signaled an 11th monthly contraction while another report showed a gauge of euro-area services and production fell to a 39-month low. Data due tomorrow may show Thailand’s exports fell the most this year.

“Weak manufacturing data from Europe and China signal demand for local exports will remain poor,” said Thammarat Kittisiripat, an economist in Bangkok at TMB Bank Pcl. (TMB) “It’s hard to see a strong rebound before the first half of next year, as Europe continues to struggle with its debt problem and a gradual recovery can only be expected in China.”

The Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, declined 0.2 percent, the most since Aug. 2, to 116.74 as of 4:33 p.m. in Hong Kong. The ringgit slid 0.7 percent to 3.0711 per dollar, Indonesia’s rupiah dropped 0.2 percent to 9,573 and the Thai baht weakened 0.4 percent to 30.95, according to data compiled by Bloomberg.

Malaysia Budget

The ringgit fell the most in a week ahead of Malaysia’s 2013 budget due on Sept. 28. The government wants to cut the budget deficit to 3 percent of gross domestic product by 2015 from about 4.7 percent this year, Second Finance Minister Ahmad Husni Mohamad said Sept. 11.

“The issues in Europe will mean that we might see bouts of risk aversion,” said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group Plc in Singapore. “Asian countries are pretty much in the limelight on how they are handling subsidies and fiscal issues, and the Malaysian number will be equally important in this respect.”

The baht depreciated before a government report tomorrow that may show overseas shipments shrank 5.8 percent in August from a year earlier, according to the median estimate of economists in a Bloomberg survey. That would be the biggest drop since December. Export growth in 2012 may be lower than previously forecast, according to the minutes of the Bank of Thailand’s Sept. 5 meeting published on Sept. 19.

Dollar Demand

South Korea’s won fell as stronger demand for foreign exchange from importers outweighed capital inflows spurred by monetary easing in the U.S. and Japan. The currency lost 0.1 percent to 1,120.55 per dollar.

The Federal Reserve announced on Sept. 13 that it will start open-ended purchases of $40 billion of mortgage debt per month, while the Bank of Japan (8301) unexpectedly expanded its asset- buying fund last week. Policy makers must control volatile capital flows as quantitative-easing measures have a negative spillover in developing countries, Bank of Korea Governor Kim Choong Soo said Sept. 14.

“There are some importers seeking dollars to pay their bills,” said Lee Jin Ill, a Seoul-based currency trader for Hana Bank. “Also, market players are wary of possible intervention in case the won attempts to break through the 1,115 level. Given global monetary stimulus, the won is likely to maintain strong upward momentum.”

Elsewhere, the Philippine peso weakened 0.3 percent to 41.775 per dollar and China’s yuan slid 0.06 percent to 6.3093. Taiwan’s dollar declined 0.1 percent to NT$29.479 while the Vietnamese dong was little changed at 20,868.

To contact the reporters on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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