Asia Currencies Decline, Led by Rupiah, as Spain Concern Mounts

Asian currencies weakened, led by Indonesia’s rupiah, as concern Europe’s debt crisis will worsen reduced appetite for emerging-market assets.

All of the 10 most-traded currencies in Asia excluding the yen are headed for monthly declines as exchange data show international investors pulled $7.7 billion from South Korean, Taiwanese and Indonesian stocks during the period. Spanish Prime Minister Mariano Rajoy called for a show of force from European authorities yesterday as his government sought ways to avoid tapping markets to fund the bailout of the nation’s third-biggest lender.

“With growing concern about Europe’s situation, we are seeing risk-off sentiment again, and investors don’t want to put money into emerging markets,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “We will continue to see a weaker bias for Asian currencies.”

The rupiah declined 0.9 percent to 9,566 per dollar as of 3:25 p.m. in Jakarta, reaching a 30-month low, according to data compiled by Bloomberg. India’s rupee dropped 0.6 percent to 55.5350 and Thailand’s baht declined 0.2 percent 31.68.

The Bloomberg-JPMorgan Asia Dollar Index traded near this year’s low after the extra yield investors demand to hold Spain’s 10-year bonds over German notes soared to the highest level since 1995.

Indonesia Intervention

The rupiah was set for a fourth monthly loss after government and exchange data showed global funds cut holdings of sovereign notes by 3.9 trillion rupiah ($413 million) and shares by $676 million.

Bank Indonesia continues to enter the foreign-exchange market and use its “ammunition” carefully, Deputy Governor Hartadi Sarwono said on May 16.

“Issues in Greece as well as Spain put the rupiah under pressure, and it is routine for importers to hold the dollar near the end of the month,” said Apressyanti Senthaury, a Jakarta-based analyst in the treasury division at PT Bank Negara Indonesia. “Bank Indonesia has committed to maintaining monetary stability, which includes guiding the rupiah.”

China’s yuan dropped for a second day on concern Europe’s debt crisis will worsen the slowdown in the world’s second-largest economy. The currency weakened 0.05 percent to 6.3482 per dollar. The decline in Chinese exports caused by weak European demand may affect whether Moody’s Investors Service raises the nation’s sovereign debt rating, Tom Byrne, a senior vice president at the company in Singapore, said yesterday.

“China is quite worried about Europe, which is its largest market,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “The central bank is increasingly focused on protecting export competitiveness. China is prepared to let its currency weaken against the dollar.”

Philippine Rating Outlook

The Philippine peso strengthened the most since December 2011, reversing earlier loses, after its sovereign rating outlook was raised by Moody’s Investors Service, which cited the country’s improving debt levels.

The outlook on the long-term foreign-currency Ba2 rating is now positive from stable, Moody’s said in a statement today. The Philippines is rated two levels below investment grade.

“The Philippine government is on the right track and we have seen strength in investment,” said Tetsuo Yoshikoshi, a senior economist at Sumitomo Mitsui Banking Corp. in Singapore.

Elsewhere, South Korea’s won advanced 0.9 percent to 1,174.82 per dollar from May 25 after onshore financial markets were closed yesterday for a public holiday. Malaysia’s ringgit fell 0.1 percent to 3.1475. Taiwan’s dollar was little changed at NT$29.645 and Vietnam’s dong was at 20,863, compared with 20,862 yesterday.

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