Rupee Leads Declines in Asian Currencies on Yen, Europe Concerns

Asian currencies fell for a third week amid concern the yen’s slump will trigger a currency war, and after the European Central Bank said the euro’s strength could hamper an economic recovery.

India’s rupee completed its worst week in 2013 after the government predicted the slowest economic growth in a decade. Taiwan’s dollar slid to a five-month low and South Korea’s won pared a weekly gain after the yen’s plunge to the weakest level since May 2010 fueled speculation policy makers will rein in exchange rates to support exports. ECB President Mario Draghi said the euro’s rally in January may slow growth and a Bank of Japan board member said this week more initiatives are needed to attain its goal of boosting inflation to 2 percent.

“It’s a risk-off situation as we can expect more verbal warning about the yen-Asia crosses given recent statements in Japan,” said Wong Chee Seng, a currency strategist in Kuala Lumpur at Ambank Group. “Concerns about the euro’s strength and debt issues in major economies are also back on the radar.”

The rupee weakened 0.6 percent this week to 53.5050 per dollar in Mumbai, according to data compiled by Bloomberg. Taiwan’s dollar slumped 0.3 percent to NT$29.75, the weakest since Sept. 11. The baht was little changed at 29.79, after erasing a weekly gain. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, dropped 0.1 percent, a third weekly decline.

India’s Growth

India’s economy will expand 5 percent in the year through March 31, the Central Statistical Office said Feb 7. The nation’s current-account deficit widened to a record in the quarter ended Sept. 30 and its budget shortfall is the widest in the largest emerging markets.

The economic projection is “raising concerns about how the government would fund its twin deficits,” analysts at Edelweiss Financial Advisors Ltd., including Mumbai-based Vinay Khattar, wrote in a research report yesterday.

The won fell 0.7 percent yesterday, the most in a week, to 1,095.80 per dollar. That pared its appreciation in the week to 0.1 percent. Foreign funds pulled 1.9 trillion won ($1.7 billion) from its stock market in January, the most since May. The government is “all ready” to intervene as the won rallied 17 percent versus the yen in the past three months, South Korean Finance Minister Bahk Jae-Wan said Jan. 23.

“The currency retreated amid concern that the authorities in countries with high dependence on exports may take actions to slow gains,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo.

Yuan Weakens

China’s yuan fell for a third week, losing 0.09 percent from Feb. 1, to 6.2325 per dollar, according to the China Foreign Exchange Trade System. It touched an eight-week low of 6.2417 earlier. Local financial markets close from Feb. 11 for a weeklong Lunar New Year holiday.

The People’s Bank of China strengthened its central parity rate at yesterday’s fixing by 0.17 percent, the biggest increase since Oct. 15. Annual inflation eased to 2 percent in January from 2.5 percent in December, official data showed yesterday.

Elsewhere, Malaysia’s ringgit rose 0.2 percent to 3.1005 per dollar from Jan. 31, Indonesia’s rupiah gained 0.5 percent this week to 9,667 and the Philippine peso was up 0.1 percent at 40.677.

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