Malaysia’s ringgit led declines in Asian currencies as concern the Chinese and U.S. economies are slowing damped the region’s export outlook.
China may continue to face difficulties for “a period of time” due to Europe’s debt crisis and the weak U.S. economy, according to a commentary published today by the official Xinhua News Agency. A Federal Reserve report yesterday showed manufacturing in New York contracted at the fastest pace since 2009. The Bloomberg-JPMorgan Asia Dollar Index reached a four-month high yesterday after the Fed announced a third round of asset purchases on Sept. 13, boosting the supply of dollars
“The growth picture remains somewhat bleak and people have just been buying into risk because of the stimulus expectations,” said Gundy Cahyadi, an economist at Oversea-Chinese Banking Corp. in Singapore. “Asian currencies are expected to take a step back.”
The ringgit dropped 0.6 percent to 3.0625 per dollar as of 4:03 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. Indonesia’s rupiah slid 0.4 percent to 9,505, the Philippine peso lost 0.3 percent to 41.74 and Thailand’s baht weakened 0.3 percent to 30.89. The Asia Dollar Index, which tracks the region’s 10 most-active currencies outside of Japan, declined 0.1 percent.
New York Manufacturing
The ringgit, which jumped 2.4 percent last week, fell the most since July as trading resumed after a holiday yesterday. Malaysia will release data tomorrow that may show inflation was 1.4 percent in August, the same as July and the lowest in more than two years, according to the median estimate of economists in a Bloomberg News survey.
“New York manufacturing has fallen quite a lot and that will have some impact,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “Risk sentiment has taken a back seat again after the Fed’s quantitative easing announcement last week.”
The rupiah retreated from a seven-week high of 9,447 per dollar reached yesterday. Recent advances were not because of intervention by policy makers but were due to the Fed stimulus, Bank Indonesia Governor Darmin Nasution said in Jakarta yesterday. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.
“The rupiah will trade around the 9,500 level again,” OCBC’s Cahyadi said.
The baht weakened for a second day before data that may show exports slumped 5.9 percent in August, the biggest drop this year, after falling 4.5 percent in July, according to the median forecast of economists surveyed by Bloomberg ahead of an official report due Sept. 20 to Sept. 25. China is Thailand’s largest export market.
“Concern about the Chinese economic slowdown is growing and that hurts the export outlook of Asian nations,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo.
South Korea’s won retreated from a six-month high after the Korea Development Institute cut its economic growth forecast for 2012 to 2.5 percent yesterday from a May projection of 3.6 percent. Policy makers must control volatile capital flows as quantitative easing measures taken in the U.S. and Europe have a negative spillover in developing countries, Bank of Korea Governor Kim Choong Soo said on Sept. 14. The won slipped 0.2 percent to 1,118.40 per dollar.
“We will be seeing some correction in the currency market as investors take caution against government intervention and risk-taking recedes,” said Han Sung Min, a Seoul-based currency trader at Busan Bank. “Still, losses will be limited as dealers are waiting to sell the dollar once the won weakens to near the 1,120 level.”
Elsewhere, China’s yuan dropped 0.03 percent to 6.3191 against the greenback. Taiwan’s dollar fell 0.2 percent to NT$29.460 and Vietnam’s dong was little changed at 20,850.