South Korea’s won dropped the most among emerging-market currencies after the official Korean Central News Agency reported North Korean dictator Kim Jong Il had died.
Kim, 70, passed away on Dec. 17 of exhaustion brought on by a sudden illness while on a domestic train trip, the news agency said. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, fell 0.2 percent and the MSCI Asia-Pacific Index of shares declined 1.8 percent. France’s AAA credit outlook was lowered to negative on Dec. 16 by Fitch Ratings, which also put Spain and Italy on review for a downgrade citing Europe’s failure to find a “comprehensive solution” to its debt crisis.
“The death of Kim Jong Il has triggered selling of the Korean won but the sell-off should be short-lived as the country apparently prepared for the transition of leadership,” said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong. “Market sentiment was already weak to begin with today on lingering European debt crisis concerns.”
South Korea’s won slid 1.4 percent to 1,174.80 per dollar at the close in Seoul, the biggest decline since Nov. 10, according to data compiled by Bloomberg. The Indonesian rupiah dropped 0.8 percent to 9,109 and the Philippine peso fell 0.4 percent to 43.990.
Europe Crisis Meeting
A statement from the North Korean government called on citizens to “loyally follow” Kim Jong Il’s son, Kim Jong Un. South Korea’s Kospi index of stocks declined 3.4 percent, the biggest drop since Nov. 10, while the won weakened the most among 25 emerging-market currencies tracked by Bloomberg.
Euro-area finance ministers hold a conference call today as they seek to meet a self-imposed deadline for arranging International Monetary Fund aid. France is scheduled to sell as much as 7 billion euros ($9.1 billion) of bills, after Fitch reduced its outlook for the nation’s credit to negative from stable. Global funds sold $1.3 billion more Indian, Indonesian, South Korean and Taiwanese stocks than they bought last week, according to exchange data.
Malaysia’s ringgit was little changed before a government report on Dec. 21 that may show consumer prices rose 3.3 percent from a year earlier in November after gaining 3.4 percent the previous month, according to the median estimate of economists in a Bloomberg News survey. The currency traded at 3.1823 per dollar, compared with 3.1778 at the end of last week.
“Market players are reluctant to take heavy positions ahead of the inflation data,” said Calbert Loh, the head of treasury at Bangkok Bank Bhd. in Kuala Lumpur. “The Malaysian currency will likely trade in a tight range as Fitch Ratings’ downgrade of France is discounted and won’t have a major impact.”
Thailand’s baht strengthened on speculation funds from insurance claims related to the nation’s worst floods in 70 years are starting to come in. The currency rose 0.2 percent to 31.29 per dollar.
There’s been about $2 billion of inflows from overseas insurers so far, Bank of Thailand Governor Prasarn Trairatvorakul said yesterday. The baht touched its weakest level since August 2010 on Dec. 16 as international investors sold $160 million more Thai equities than they bought last week and pulled $316 million from government debt, according to data from the stock exchange and the Thai Bond Market Association.
“Fund inflows related to insurance payments are one of the only supporting factors for the baht,” said Sadaaki Kondou, senior vice president of the Asian and emerging-markets team at Mizuho Corporate Bank Ltd. in Tokyo. “Sentiment for emerging-market currencies seems to be quite weak due to concern Europe won’t be able to solve its debt crisis anytime soon.”
China’s yuan gained on signs that the government favors a stronger exchange-rate, after the People’s Bank of China raised the daily reference rate to the highest level in a week. The currency advanced 0.17 percent to 6.3378 per dollar.
China allowed qualified institutional investors to use yuan funds raised in Hong Kong in its domestic capital market on a trial basis, according to a statement dated Dec. 16 on the China Securities Regulatory Commission’s website. The program was “an important step in making the yuan an international currency” as it offered more channels to invest, Yim Fung, chief executive officer of Guotai Junan International Holdings Ltd. in Hong Kong, said in a phone interview today.
Other reports this week may show Taiwan’s export orders rose 2.8 percent last month from a year earlier, after gaining 4.4 percent in October, according to the media estimate of economists surveyed by Bloomberg before official data tomorrow. The central bank will meet to review borrowing costs on Dec. 29 and two of nine analysts surveyed by Bloomberg predict the benchmark interest rate will be cut to 1.75 percent from 1.875 percent. The rest forecast no change.
Elsewhere, Taiwan’s dollar was little changed at NT$30.398 versus its U.S. counterpart, while Singapore’s dollar fell 0.2 percent to S$1.3046. India’s rupee dropped 0.3 percent to 52.9200.