Asian Currencies Drop as Data Confirm China’s Slowdown

Asian currencies fell for a second week as Chinese data added to signs the global economy is slowing, helping drive the worst five-day performance in regional stocks in almost two months.

South Korea’s won snapped a six-week winning streak after the central bank cut interest rates and trimmed its 2012 growth forecast to 3 percent from 3.5 percent. China’s gross domestic product increased by the slowest rate in more than three years in the second quarter, while imports missed economists’ estimates, damping the outlook for Asian exports.

“There has been growing concern over the global economic slowdown and that makes it hard for investors to take riskier positions,” said Kozo Hasegawa, a Bangkok-based currency trader at Sumitomo Mitsui Banking Corp. “Sentiment is rather weak.”

The won weakened 1.1 percent since July 6 to 1,150.20 per dollar in Seoul, according to data compiled by Bloomberg. The Philippine peso fell 0.5 percent to 41.98, Indonesia’s rupiah lost 0.5 percent to 9,448 and Thailand’s baht declined 0.1 percent to 31.66.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, was near the lowest this month, following a 0.5 percent loss in the previous week. The gauge’s 60-day historical volatility climbed to 3.67 percent from 3.64 percent on July 6.

Korea, China

The Bank of Korea lowered its growth assessment after unexpectedly cutting its benchmark seven-day repurchase rate by 25 basis points to 3 percent July 12, the first reduction since February 2009. Bank Indonesia kept borrowing costs unchanged at 5.75 percent on the same day.

China, the world’s second-largest economy, grew 7.6 percent in the second quarter from a year earlier, compared with the 8.1 percent pace in the first three months and the median estimate in a Bloomberg survey for a 7.7 percent expansion, the statistics bureau said in Beijing yesterday.

Europe’s escalating debt crisis prompted Moody’s investors Service to lower Italy’s credit rating July 12 as investors pushed up the nation’s cost of borrowing on concern it may fail to meet fiscal targets.

“China holds the key to the economic recovery and if China’s rebound kicks off in the second half, the outlook for many nations including South Korea could improve,” said Oh Suk Tae, an economist at SC First Bank Korea Ltd. in Seoul.

The yuan fell 0.23 percent to 6.3789 per dollar, the most since the five days ended June 1, according to the China Foreign Exchange Trade System. The central bank lowered the currency’s daily reference rate for a third day, by 0.05 percent to 6.3247.

Singapore GDP Contracts

Singapore data yesterday added to signs China’s slowing growth is having an impact on other regional nations. The city-state’s GDP fell an annualized 1.1 percent in the three months through June from the previous quarter, when it climbed a revised 9.4 percent, the Trade Ministry said in an e-mailed statement. The median estimate of 14 economists in a Bloomberg News survey was for a 0.6 percent expansion.

China’s exports grew 11.3 percent last month, slowing from 15.3 percent in May, while imports increased 6.3 percent compared with 12.7 percent. Foreign-exchange reserves fell $65 billion to $3.24 trillion at the end of June, the People’s Bank of China said July 12. Policy makers cut the one-year lending rate in June and July.

“The decline in reserves probably reflects capital outflows as growth slows,” said Tommy Ong, senior vice-president of treasury and markets at DBS Bank (Hong Kong) Ltd. “We expect China’s growth to rebound in the third quarter as government stimulus should come into effect.”

Rupee Advances

India’s rupee strengthened the most since July 3 yesterday, erasing the weekly loss, on speculation the central bank will join policy makers worldwide in taking steps to spur growth.

The Reserve Bank of India may lower interest rates by 50 basis points at a review on July 31, according to Citigroup Inc. The monetary authority had kept borrowing costs unchanged last month after lowering them in April for the first time since 2009. A government report July 12 showed industrial output rose 2.4 percent in May, less than an average 5.1 percent in the previous two years.

“We believe the rupee has overshot and that positive changes are starting to occur,” said Gaurav Garg, a strategist at Citigroup in Singapore. In the short term, the rupee is “our most-favored currency in Asia,” he said.

The rupee climbed 0.6 percent this week to 55.1450 per dollar, buoyed by a 1.4 percent rally yesterday. Elsewhere, Taiwan’s dollar depreciated 0.3 percent to NT$30.015 against its U.S. counterpart and Malaysia’s ringgit lost 0.2 percent to 3.1858. The Vietnamese dong was little changed at 20,865.

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