India’s rupee and South Korea’s won led declines in Asian currencies this week on signs the European debt crisis is starting to slow regional economic growth.
The MSCI Asia-Pacific Index of stocks dropped the most in a month on concern eurozone leaders would fail to agree on a new package aimed at stemming the crisis and boosting confidence in financial markets. Malaysia reported on Friday that export growth slowed in October, while Japanese data showed the economy expanded less than the initial estimate last quarter.
“We are seeing the risk-off mood and emerging-market currencies are under pressure,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “There’s concern about a global slowdown.”
The rupee declined 1.6 percent this week to 52.0425 per US dollar in Mumbai. The won weakened 1.4 percent to 1,146.83, Malaysia’s ringgit dropped 1 percent to 3.1513 and Indonesia’s rupiah fell 0.3 percent to 9,080.
“All eyes have been on the eurozone because that will determine the capital flows into emerging markets,” said Radhika Rao, an economist at Forecast Pte in Singapore.
China’s yuan declined this week on speculation policymakers would slow currency appreciation after inflation cooled to the least in 14 months. Consumer prices rose 4.2 percent last month from a year earlier after increasing 5.5 percent the previous month, the Chinese National Bureau of Statistics said on Friday.
The yuan fell 0.08 percent to 6.3647 per US dollar this week in Shanghai, according to the China Foreign Exchange Trade System. The People’s Bank of China set the daily reference rate 0.05 percent lower at 6.3352 on Friday, the weakest level since Thursday last week. The currency is allowed to fluctuate as much as 0.5 percent on either side of the fixing.
“Easing inflation implies there’ll be less room for yuan appreciation,” said Edmond Law, deputy head of foreign exchange at BWC Capital Markets (寶華世紀資本市場) in Hong Kong. “Officials will now shift their focus to protecting economic growth amid the increasingly uncertain global outlook. The inflation data confirms further monetary easing is likely.”
Elsewhere, the New Taiwan dollar fell 0.3 percent to NT$30.239 per US dollar this week, the Philippine peso dropped 0.8 percent to 43.63. Thailand’s baht declined 0.5 percent to 30.94 and Singapore’s dollar weakened 1.1 percent to S$1.2981.
Traders were also betting on a stronger US dollar, as sentiment was further dampened after the European Central Bank (ECB) refused to commit to bond purchases to aid the debt-ridden members, dealers in Taipei said.
As Taiwan’s exports last month fell 8.7 percent from a month earlier, worries have been running deeper that the European financial crisis would further affect the already fragile economic fundamentals and hurt global demand, according to the dealers.
The NT dollar showed its weakness in line with most of its counterparts in Asia, in particular the won, they said.
The euro fell against the majority of its most-traded counterparts after an EU agreement for tighter fiscal controls failed to convince investors the region’s two-year financial crisis is closer to a resolution.
The 17-nation currency weakened for the fifth week in the past six against the US dollar on speculation leaders would struggle to institute tougher anti-deficit rules and as ECB President Mario Draghi damped speculation the central bank would step up its bond-buying.