Asian Currencies Extend Losses on Europe Debt Risks; Won Falls

Most Asian currencies weakened, adding to yesterday’s biggest loss in two weeks, as lingering concern over Europe’s debt curbed appetite for emerging-market assets before Spain and France sell more bonds.

Thailand’s baht declined for a second day and South Korea’s traded near a one-week low as regional stocks fell. Spain and France plan to raise as much as 13.5 billion euros ($17.6 billion) from debt today, with Italy predicting a deeper economic contraction this year. The Philippine peso reversed losses before the central bank’s decision to keep interest rates unchanged was announced, after policy makers cut borrowing costs at the previous two meetings.

“We are seeing risk-off sentiment due to the European debt crisis again,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl. “That’s the major factor moving the currency market today.”

The baht slipped 0.2 percent to 30.89 per dollar as of 3:17 p.m. in Bangkok, according to data compiled by Bloomberg. The won dropped 0.1 percent to 1,138.05 at the close in Seoul, while India’s rupee fell 0.1 percent to 51.8262. China’s yuan declined 0.08 percent to 6.3078.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, was little changed after losing 0.2 percent yesterday, the most since April 4, as government bond yields rose in Spain and France.

Italy, Spain Concerns

Italy’s economy will shrink 1.2 percent this year, versus a December forecast for a 0.5 percent contraction, the government said yesterday. Spain’s non-performing loans jumped to 8.16 percent of total lending in February, the highest level since 1994, the central bank said yesterday.

“Spain’s bad-loan issue and Italy cutting its growth forecast are renewing concerns over Europe’s periphery states,” said Byeon Ji Young, a Seoul-based currency analyst at Woori Futures Co.

The won also dropped as the Bank of Korea said downside risks to the economy will probably persist due to volatile oil prices and concerns over Europe before an expected recovery in the second half, according to a statement.

The peso climbed 0.1 percent to 42.618 per dollar in Manila. Bangko Sentral ng Pilipinas lowered its overnight rate by 25 basis points in January and March to 4 percent. Today’s decision was predicted by all 17 economists surveyed by Bloomberg.

The yuan weakened after the People’s Bank of China lowered its daily fixing for the yuan by 0.09 percent to 6.3004. The central bank doubled the limit of the currency’s moves to 1 percent either side of the reference rate from this week.

Elsewhere, Malaysia’s ringgit was little changed at 3.0640 per dollar. Indonesia’s rupiah traded at 9,183 versus 9,180 yesterday and Vietnam’s dong lost 0.1 percent to 20,838. Taiwan’s dollar pared gains, closing 0.1 percent stronger at NT$29.532.

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