Asian Currencies Drop as U.S., Greece Budget Risks Spur Outflows

Asian currencies dropped this week as concern budget deficits in the U.S. and Greece will delay a global economic recovery prompted investors to pull money from riskier assets.

The Philippine peso led declines with its biggest weekly loss in three months after growth in remittances from citizens living abroad slowed, while China’s yuan pared gains after reaching a 19-year high. President Barack Obama began negotiations with Democratic and Republican congressional leaders yesterday to address the so-called U.S. fiscal cliff, which involves $607 billion of automatic spending cuts and tax increases. Euro-area finance ministers will hold a meeting to discuss aid for Greece.

“Stock declines are hurting risk sentiment and investors are selling Asian equities, putting downward pressure on regional currencies,” said Koji Fukaya, president of currency research and consulting company Office Fukaya in Tokyo and a former chief foreign-exchange strategist at Credit Suisse Group AG. “Money will continue to flow into emerging markets and their currencies will recover in the medium to long term.”

The peso slid 0.7 percent this week to 41.335 per dollar in Manila, according to Tullett Prebon Plc. The Thai baht fell 0.4 percent to 30.76 and Malaysia’s ringgit dropped 0.3 percent to 3.0729. South Korea’s won weakened 0.4 percent to 1,093.23, according to data compiled by Bloomberg.

Capital Outflows

Global funds sold more local stocks than they bought in Indonesia, South Korea, Taiwan and Thailand this week, exchange data show. Inflows into emerging-market debt slowed to $665 million in the week to Nov. 14, compared with weekly intakes exceeding $1 billion in the past two months, according to a Morgan Stanley report citing data from U.S. research firm EPFR Global.

The ringgit weakened as Malaysia’s economy grew 5.2 percent from a year earlier in the three months through September, official data showed. That compares with the median forecast of a 4.8 percent increase and a 5.4 percent expansion in the preceding period.

In Singapore, the economy in the third quarter shrank 5.9 percent from the preceding three months, compared with a 2.9 percent contraction forecast in a Bloomberg survey. The government said yesterday gross domestic product will expand 1 percent to 3 percent in 2013, near the slowest pace in three years.

‘Remain Volatile’

“Risk appetite is tapering as the weak Singapore GDP reflects Asian growth for the third quarter,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “Asian currencies are likely to remain volatile because of concern over global growth.”

China’s yuan climbed 0.15 percent to 6.2356 per dollar this week, the most in a month. The currency reached a 19-year high of 6.2252 on Nov. 14, having tested the 1 percent upper band of the central bank’s fixing rate every day since Oct. 30.

China will expand the Renminbi Qualified Foreign Institutional Investor Program quota by 200 billion yuan ($32 billion) from 70 billion yuan, Guo Shuqing, chairman of the securities regulator, said Nov. 11. The Communist Party unveiled its new leaders this week, with Xi Jinping replacing Hu Jintao as party secretary.

“China is encouraging inflows of capital as a way to stimulate its economy, which will keep the yuan at a strong level,” said Daniel Chan, executive vice president at Glory Sky Global Markets Ltd. in Hong Kong. “The key uncertainty now is who will be in charge of economic policies in China’s new leadership and how aggressive they are in terms of reforms.”

Elsewhere, India’s rupee fell 0.8 percent from a week ago to 55.178 per dollar and Indonesia’s rupiah dropped 0.14 percent to 9,633. Taiwan’s dollar declined 0.42 percent to NT$29.272. Vietnam’s dong was little changed at 20,858.

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