Rupiah Leads Drop in Asia as Spain, Greek Crisis Damps Demand

Indonesia’s rupiah and Malaysia’s ringgit led declines in Asian currencies after Spain’s credit rating was cut and data in the U.S. renewed concern the global economic recovery is faltering.

The MSCI Asia Pacific Index of shares fell after Moody’s Investors Service lowered ratings on Spain and Cyprus, citing increased debt burdens. Greece will hold elections this weekend, which may determine if the country stays in the euro. The Philippine peso reached a one-month high after exports climbed more than economists predicted in April.

“The general weakness story on Asian currencies is still there,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “Fiscal austerity is dragging down Europe’s growth outlook. There’s a bit of caution ahead of the Greek elections.”

The rupiah weakened 0.6 percent to 9,480 per dollar as of 3:40 p.m. in Jakarta, according to data from local banks compiled by Bloomberg. The ringgit fell 0.2 percent to 3.1862 and India’s rupee lost 0.2 percent to 55.79. The peso advanced 0.2 percent to 42.558.

Moody’s yesterday cut Spain’s rating three steps to Baa3 from A3, and lowered Cyprus’s bond rating to Ba3 from Ba1, attributing the downgrade to the material increase in the likelihood of a Greek exit from the euro area. Retail sales in the U.S. fell for a second month in May, Commerce Department figures showed yesterday. Euro-area industrial production declined for a second month in April, the European Union statistics office said yesterday.

Retail Sales

The rupiah dropped for a second day, capping a 2.5 percent slide in the past one month, after demand at the central bank’s dollar term deposit offering was below expectations.

Bank Indonesia accepted $700 million of seven- and 14-day deposits yesterday at 0.17 percent and 0.18 percent, respectively. That compared with rates in the U.S. of 0.23 percent for one week and 0.24 percent for 15 days. The auction was expected by the central bank to tempt local lenders to bring home about $2 billion a day on average, bolstering the rupiah.

“The demand was not too strong,” said Klara Pramesti, a Jakarta-based treasury analyst at PT Bank Negara Indonesia. “Investors still tend to seek safe havens so whatever instruments we introduce will not have much effect until global conditions stabilize.”

The peso reached the highest level since May 11 after overseas shipments rose 7.6 percent in April from a year earlier, following a 0.8 percent contraction in March. Economists predicted a 0.5 percent gain in a Bloomberg survey.

The central bank held its benchmark interest rate at 4 percent today, joining counterparts in Thailand, South Korea and Indonesia in leaving borrowing costs unchanged this month.

Yuan Advances

China’s yuan declined 0.02 percent to 6.3703 per dollar in Shanghai, according to China Foreign Exchange Trade System. The central bank set its reference rate 0.13 percent stronger at 6.3191.

Credit Suisse Group AG cut China’s economic growth forecast for 2012 to 7.7 percent from 8 percent and that for 2013 to 7.9 percent from 8.2 percent, economist Tao Dong wrote in a June 13 note to clients.

Elsewhere, Taiwan’s dollar gained 0.1 percent to NT$29.954 and South Korea’s won gained 0.2 percent to 1,166.35. Thailand’s baht was little changed at 31.57 versus U.S. currency and the Vietnamese dong was steady at 20,958.

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