Asian currencies retreat as concerns over US, Greece budgets spur outflows

RISK AVERSE::The NT dollar climbed to a 14-month high against the greenback on Monday, but ended the week lower as foreign institutions sold local equities

Bloomberg

Sun, Nov 18, 2012 - Page 15

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

The Philippine peso led the 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. US President Barack Obama began negotiations with Democratic and Republican congressional leaders on Friday to address the US fiscal cliff, which involves US$607 billion of automatic spending cuts and tax increases.

“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. “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 US dollar in Manila, according to Tullett Prebon.

The New Taiwan dollar breached the NT$29 mark on Monday to reach NT$28.959, its strongest level in 14 months. However, it ended the week 0.42 percent lower at NT$29.272 on a combination of foreign institutional selling of local equities and central bank intervention, dealers said.

NT dollar forwards had the worst week in more than five months as overseas investors cut holdings of Taiwanese stocks amid concern a global slowdown would hurt exports. Global funds sold US$458 million more local shares than they bought this week, according to Taiwan Stock Exchange data.

Both the Thai baht and the South Korean won fell 0.4 percent to 30.76 baht and 1,093.23 won, as global funds sold more local stocks than they bought, exchange data showed.

Malaysia’s ringgit dropped 0.3 percent to 3.0729, as the 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.

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

“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 in Hong Kong.

Elsewhere, India’s rupee fell 0.8 percent from a week ago to 55.178 per US dollar and Indonesia’s rupiah slid 0.14 percent to 9,633. Vietnam’s dong was little changed at 20,858.