Slowdown risk pelts Asian currencies

Bloomberg

Sun, May 08, 2011 - Page 10

Asian currencies had their worst week in four months, led by a slide in Malaysia’s ringgit, as data suggesting the US recovery is faltering dimmed the outlook for exports and curbed demand for riskier assets.

The Bloomberg-JPMorgan Asia Dollar Index, a gauge of the region’s 10 most-used currencies excluding the yen, slumped 0.6 percent, its biggest loss since the first week of this year.

The ringgit dropped 1.4 percent to 3.0025 versus the greenback and India’s rupee slid 1.3 percent to 44.795. South Korea’s won fell 1.1 percent to 1,083.34 after the financial regulator said it would expand an investigation into banks’ trading of currency derivatives.

The New Taiwan dollar retreated 0.06 percent to NT$28.778. The currency was headed for a weekly gain until it fell 0.4 percent in the last three minutes of trading on Friday. It touched a 13-year high on Tuesday, the first day of trading after Taiwan reported on Friday last week that GDP grew 6.2 percent in the first quarter.

The central bank “probably wanted more room until the NT dollar tests the NT$28.50 level again next week,” said Tarsicio Tong (湯健揚), a Taipei-based currency trader at the Union Bank of Taiwan (聯邦銀行).

“People are increasingly more concerned about the global growth situation with the US data coming in soft,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “Asia is by and large a manufacturing and exporting hub, so it will be hurt as well. There’s some amount of risk reduction going on in the market.”

A Purchasing Managers’ Index in China indicated manufacturing is cooling in Asia’s biggest economy and slides in commodities prices damped speculation yuan appreciation will be favored to tame inflation. China is the world’s No. 1 importer of copper, cotton and soybeans, as well as the second-biggest buyer of crude oil.

Bangko Sentral ng Pilipinas lifted its benchmark rate by a quarter of a percentage point to 4.50 percent shortly after 4pm on Friday in Manila, as predicted by 12 of 16 economists surveyed by Bloomberg. The Philippine peso dropped 0.6 percent to 43.08 per US dollar.

Thailand’s baht slid the most this week since January, as Thai Prime Minister Abhisit Vejjajiva said on Friday he would seek a royal decree to dissolve parliament, which would trigger an election within 45 to 60 days. The two most recent votes were marred by street protests and legal rulings against the elected politicians.

“There’s a mood of risk aversion in the market and stock declines are dragging down Asian currencies, including the baht,” said Hideki Hayashi, a global economist at Mizuho Securities Co in Tokyo. “Political uncertainty is adding to weak sentiment for the baht.”

The baht slid 1.2 percent to 30.24 per US dollar in Bangkok, the biggest weekly loss since January.

Elsewhere, Indonesia’s rupiah slipped 0.1 percent to 8,578 per US dollar, Singapore’s dollar declined 0.8 percent to S$1.2355 and the yuan fell 0.04 percent to 6.4938, snapping a run of seven weekly advances.