Asian currencies had their biggest monthly loss in more than a decade as a global slowdown and concern some European nations will struggle to pay debts bolstered demand for the relative safety of the US dollar.
The New Taiwan dollar dropped the most since October 1997 and South Korea’s won completed its worst month since February 2009, as overseas funds pulled a combined US$3.9 billion from their stock markets. About three-quarters of 1,031 investors, analysts and traders said the eurozone economy would fall into recession during the next 12 months, according to a Bloomberg quarterly Global Poll published on Thursday.
“The odds are rising for a recession in Europe and we are seeing adjustments to market positioning on risk aversion,” said Roy Teo, a currency strategist at ABN Amro Private Bank in Singapore. “Asian economies and currencies will not be spared as global growth is revised down.”
The Bloomberg-JPMorgan Asia Dollar Index slid 4.1 percent last month to 114.72, the biggest drop since December 1997. The NT dollar dropped 4.9 percent to NT$30.506 per US dollar, the won lost 9.45 percent to 1,178.10 and Malaysia’s ringgit weakened 7 percent to 3.1941. The Thai baht depreciated 3.7 percent to 31.10, its worst performance since March 2001.
Global funds pulled US$2.6 billion from Taiwanese equities this month through Friday and cut their holdings in South Korea by US$1.3 billion, exchange data show. In Thailand, they sold US$542 million more equities and US$61 million more government debt than they bought.
The IMF lowered its forecast for global growth this year to 4 percent from 4.3 percent, and for next year to 4 percent from 4.5 percent last week, predicting a “severe” fallout if Europe fails to contain its debt crisis. Central banks in Malaysia, Indonesia and the Philippines confirmed in the past two weeks that they intervened to support their currencies, while counterparts in India, South Korea and Thailand said they were prepared to take similar action.
“Asia’s currencies are under pressure because of fund outflows, as investors have been risk averse due mainly to the European debt crisis,” said Kozo Hasegawa, a trader at Sumitomo Mitsui Banking Corp in Bangkok. “Sentiment may not recover anytime soon.”
The won dropped 0.4 percent in Seoul on Friday, approaching a one-year low of 1,196.13 reached on Friday last week. The Bank of Korea reported on Thursday an August current-account surplus of US$401 million that was the smallest in seven months.
The ringgit slipped 0.5 percent on Friday, capping its worst month since June 1998. The rupiah gained on Friday to trade at 8,790 per US dollar, trimming losses last month to 2.9 percent. The baht also gained 0.2 percent on Friday, rebounding from a one-year low of 31.24 per US dollar on Thursday.
India’s rupee declined 5.9 percent to 48.9725 per US dollar last month in Mumbai before the currency market closed on Friday for a holiday, after sliding 4.1 percent in August.
The Philippine peso weakened 3.3 percent for the month to 43.735, while the yuan fell 0.1 percent to 6.3859 for its first loss since January.
US DOLLAR, YEN GAIN
The US dollar and the yen strengthened on growing evidence the global economy is slowing.
The euro posted its biggest monthly decline against the yen in more than a year after data showed German retail sales fell by more than economists forecast and US consumer spending slowed in August. New Zealand’s dollar extended its second week of losses against its US counterpart after Standard & Poor’s joined Fitch Ratings in cutting the nation’s credit ratings.
The US dollar strengthened 1.5 percent to US$1.3387 per euro at 5pm in New York on Friday, extending its advance last month to 7.3 percent. The Japanese currency gained 1.3 percent to ￥103.12 per euro, set for a 7 percent advance last month. The greenback rose 0.3 percent to ￥77.06, after touching the strongest level since Sept. 15.
The yen has gained 12.6 percent in the past three months. The US dollar is up 7.1 percent, while the euro is down 2 percent.
The New Zealand dollar sank for a third day, dropping 1.3 percent to US$0.7614, taking its loss this week to 2 percent and its monthly decline to 11 percent.
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