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Asia Currencies Fall on U.S. Housing Data, Regional Stock Drops

Asian currencies declined, led by South Korea’s won, as data cast doubt on the strength of the U.S. economic recovery and regional stocks fell.

Purchases of new homes in the U.S. dropped 1.6 percent to a 313,000 annual pace last month, less than the median estimate of 325,000 in a Bloomberg News survey, a report showed on March 23. The MSCI Asia-Pacific Index of stocks fell for a second day as a report showed Chinese banks have understated the risks of loans to local governments. Italy’s Prime Minister Mario Monti warned that Spain could reignite Europe’s debt crisis.

“We saw a risk-off mood in emerging-market currencies today, with the U.S. housing data boding ill for growth and therefore Asian exports,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB.

The won weakened 0.6 percent to 1,141.63 per dollar, a two-month low, at the 3 p.m. close in Seoul, according to data compiled by Bloomberg. India’s rupee dropped 0.4 percent to 51.3988, while the Philippine peso fell 0.2 percent to 43.065. China’s yuan declined 0.10 percent to 6.3140.

The Bloomberg-JPMorgan Asia Dollar Index dropped 0.2 percent, the biggest decline in almost a week. The gauge’s 60-day historical volatility was at 3.44 percent from 3.50 percent at the end of last week.

World leaders gather in Seoul today and tomorrow for the Nuclear Security Summit, aimed at keeping fissile material out of the hands of terrorists. U.S. President Barack Obama warned North Korea yesterday that its plan to fire a long-range rocket undermined prospects for future negotiations. South Korea is preparing steps to trace or intercept the North’s missile if it veers off course and reaches the South, Kim Min Seok, a spokesman at South Korea’s defense ministry, said today.

Negative Reports

“The won tested the lower side today as overseas reports turned a little negative and stocks declined,” said Ryoo Hyun Jung, a Seoul-based chief currency dealer at Citibank Inc. “The ongoing nuclear summit also affected sentiment.”

The yuan reversed an earlier advance after the People’s Bank of China set its daily reference rate at a record high amid speculation policy makers are preparing to widen the currency’s trading band. The daily fixing was set 0.05 percent stronger at 6.2858 per dollar, the highest since the currency was allowed to float in 2005.

“There’s a risk-off dynamic in play as global equities are weak,” said Robert Minikin, a strategist at Standard Chartered Plc. in Hong Kong.

Elsewhere, Taiwan’s dollar fell 0.1 percent to NT$29.622 against its U.S. counterpart. Malaysia’s ringgit weakened 0.1 percent to 3.0800, while Thailand’s baht and Vietnam’s dong were little changed at 30.78 and 20,895, respectively. Indonesia’s rupiah advanced 0.1 percent to 9,178.

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