Asian currencies fell this week, led by South Korea’s won and the Philippine peso, as a major earthquake in Japan spurred demand for US dollars and yen, while signs the global recovery is losing steam deterred risk-taking.
The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, declined 0.2 percent for the week. A magnitude 8.9 earthquake on Friday prompted a slump in regional stocks. Overseas investors sold US$2.8 billion more Taiwanese and South Korean stocks than they bought this week, exchange data show.
“The impact from the earthquake could result in slower external trade, as Japan is traditionally one of the top three markets for Asian exporters,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank in Kuala Lumpur. “Also, if growth in China cools off further, it could chip away some of the recent gains in Asian currencies.”
South Korea’s won dropped 0.9 percent from a week earlier to 1,124.18 against the US dollar, according to data compiled by Bloomberg. The Philippine peso slipped 0.9 percent to 43.65.
The New Taiwan dollar and Indian rupee each fell almost 0.5 percent this week to NT$29.599 and 45.1825, respectively.
“The earthquake raised concern some economic activities will be halted in Japan,” Tsutomu Soma, a bond and currency trader at Okasan Securities Co in Tokyo, said on Friday.
Sony Corp, Toyota Motor Corp and Canon Inc are among companies that suspended production in factories affected by the quake.
Also, China’s yuan fell 0.1 percent this week to 6.5746.
Malaysia’s ringgit dropped to its lowest level since March 2 after the central bank held its overnight policy rate at 2.75 percent for a fourth straight meeting. Four had expected a 25 basis point increase.
Bank Negara Malaysia doubled the statutory reserve ratio to 2 percent, requiring banks to set aside zero-interest money with the central bank from April 1, to tighten credit.
The ringgit declined 0.6 percent on the week to 3.0460 per US dollar, the biggest drop in a month.
Elsewhere, the Singapore dollar fell 0.5 percent for the week to S$1.2736 against its US counterpart, according to data compiled by Bloomberg. Indonesia’s rupiah depreciated 0.2 percent to 8,803, while Thailand’s baht gained 0.1 percent to 30.46.
The euro dropped against most of its major counterparts before leaders of the 17 eurozone nations agreed to tighten economic cooperation, clearing the way for a comprehensive package to counter the region’s debt crisis.
The shared currency fell versus the US dollar this week for the first time in a month, before the pact was reached, on credit-rating cuts for Spain and Greece. The yen rose against all of its peers after the earthquake, increasing speculation insurance companies and investors will buy back yen to pay for damages.
EURO, US DOLLAR, YEN
The euro dropped 0.6 percent to US$1.3909, the biggest decline since the five days ending Jan. 7, from US$1.3987 on March 4. It weakened 1.2 percent to ¥113.76, from ¥115.13.
Meanwhile, the Japanese currency appreciated 0.6 percent to ¥81.84 per US dollar, from ¥82.32 last week. The yen strengthened the most since Dec. 3 last year on safe-haven demand.
“The rebuilding process in general is perceived as positive for the yen,” said Alan Ruskin, global head of G10 foreign-exchange strategy at Deutsche Bank AG in New York. “The market’s focus has been on the prospects for repatriation of funds.”
The yen strengthened about 20 percent versus the US dollar in three months after the magnitude 6.9 Kobe earthquake in January 1995, which claimed more than 6,000 lives.
Friday’s earthquake may not have the same affect on the currency and growth as the 1995 earthquake did, according to Mamoru Arai, a senior currency trader at Mizuho Financial Group Inc in New York.
“At that time, the yen went higher to a historical level, but we had a very strong trade war between the US and Japan,” Arai said. “There is no economic disturbance between the US and Japan, so I doubt this will lead to severe appreciation in the yen.”
Japan’s monthly global trade surplus plunged after the Kobe earthquake prevented exports from being shipped from the city’s damaged port in January 1995. The trade surplus recovered amid continued threats from then-US president Bill Clinton’s administration that US officials were considering trade sanctions if talks regarding the auto industry broke down.
Meanwhile, the pound weakened 1.2 percent to US$1.6082 and dropped 0.6 percent to £0.8646 per euro, the worst performance among the major currencies.
The Reserve Bank of New Zealand cut its overnight lending rate to match a record low of 2.5 percent March 9 to help the nation’s economy recover from the deadliest earthquake in 80 years.
The kiwi, as the currency is known, added 0.6 percent to US$0.7427.
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