Asia currencies fall on weak yen

‘CURRENCY WAR’::Taiwan and South Korea led the regional drop, as monetary easing in Japan weakened the yen, prompting a Seoul official to warn of a global currency war

Bloomberg

Sun, Feb 03, 2013 - Page 15

Asian currencies fell for a second week, led by South Korea’s won and the Taiwan dollar, on concern that the yen’s slide to a two-and-a-half-year low will hurt exports from the region’s emerging market economies.

The Bloomberg-JPMorgan Asia Dollar Index touched a two-month low on Friday as a Bank of Korea board member warned of a global currency war.

The yen weakened versus the US dollar in each of the past four months, amid speculation that Japanese Prime Minister Shinzo Abe will push aggressive stimulus measures.

India’s rupee had a weekly advance after the central bank cut rates for the first time in nine months.

The Asia Dollar Index, which tracks the region’s 10 most active currencies excluding the yen, lost 0.3 percent this week, following a 0.6 percent decline in the five days ended on Friday last week. The won fell 2.1 percent to 1,097.38 per US dollar, the biggest loss since May last year, data compiled by Bloomberg show.

The New Taiwan dollar had its worst week in 16 months as the yen’s slide fanned speculation that the central bank will rein in the exchange rate to protect exports.

The NT dollar weakened 1.4 percent this week to NT$29.668 against its US counterpart, Taiwan Stock Exchange data showed. That is the biggest five-day loss since September 2011. It weakened 0.3 percent on Friday and hit NT$29.70 on Tuesday, the weakest since Sept. 14, 2011.

Policymakers on Tuesday said they will intervene in the currency market if “irregular factors” cause excessive volatility.

“The central bank’s been carefully watching other Asian currencies,” Uni-President Assets Management Corp (統一投信) fund manager Samson Tu (涂韶鈺) said.

One-month implied volatility in the NT dollar, a gauge of expected swings used to price options, climbed 114 basis points, or 1.14 percentage points, to 4.52 percent during the five-day period, data compiled by Bloomberg show.

The won sank as much as 0.9 percent to a three-month low of 1,098.25 per US dollar on Friday as global funds cut holdings of South Korean stocks for a seventh day, the longest run of reductions since November last year.

A global currency war seems to be breaking out as monetary easing in Japan drags the yen lower, Ha Sung-keun, a Bank of Korea board member, said on Monday in Seoul. South Korea’s government wants to cut the “vicious cycle” in which fast money inflows increase the won’s volatility, South Korean Deputy Minister of Finance Choi Jong-ku said on Wednesday.

The rupee advanced 0.9 percent this week to 53.1975 per US dollar as the Reserve Bank of India said cooling inflation provides some room for further policy easing.

China’s yuan halted a two-day gain as the lowering of the central bank’s daily fixing forced the currency to weaken to stay within its 1 percent permitted trading range. The spot rate fell 0.13 percent on Friday to 6.2270 per US dollar in Shanghai. It lost 0.1 percent this week.

Elsewhere in Asia, Indonesia’s rupiah weakened 0.6 percent this week to 9,713 per US dollar, the Thai baht gained 0.4 percent to 29.78, the Philippine peso lost 0.1 percent to 40.71 and Vietnam’s dong was little changed at 20,843. Malaysia’s financial markets were closed on Friday for a holiday.

The yen tumbled this week as Abe faced a decision on who will replace Bank of Japan Governor Masaaki Shirakawa, whose term ends in April. The yen further on Friday weakened to ¥92.30 per US dollar.

The euro touched the highest level against the US dollar in 14 months as the European Central Bank’s (ECB) balance sheet contracted while the US Federal Reserve said it would keep pumping money into the US economy.

The 17-nation currency gained for a second week, its first back-to-back advance this year, amid data showing that Europe’s economy may be improving.

The shared currency rallied 1.3 percent to US$1.3640 this week in New York. It touched US$1.3711, the strongest level since Nov. 14, 2011. Against the yen, the euro climbed 3.6 percent, the most since February last year, to ¥126.66 and touched ¥126.97, the highest since April 2010.

The US dollar reached ¥92.97, the highest since May 2010, and gained 2.1 percent on the week to ¥92.77. It has never before risen for 12 straight weeks versus the Japanese currency, records compiled by Bloomberg dating to 1971 show.

The euro gained 4.8 percent over the past three months among the 10 developed nation currencies tracked by Bloomberg Correlation-Weighted Indeces. The yen tumbled the most with a 16 percent decline.

The European currency on Friday gained versus the US dollar and yen as a gauge of manufacturing in the 17-nation region last month rose to its highest level in almost a year.

The purchasing managers’ index increased to 47.9, the most since February last year, London-based Markit Economics said. It has been below the 50 level that signals contraction for 18 months.

The ECB’s balance sheet fell to 2.93 trillion euros (US$4 trillion) in the week ended on Jan. 25.