Asian currencies dropped for a fourth week, led by South Korea’s won and India’s rupee, as Europe’s debt crisis showed no signs of abating, prompting investors to favor safer assets including the dollar.
The Bloomberg-JPMorgan Asian Dollar Index sank to a two-month low after German Chancellor Angela Merkel on Thursday ruled out joint eurozone borrowing and an expanded role for the European Central Bank to fight the debt crisis. Taiwan cut its economic growth forecasts on Thursday, while the Reserve Bank of India announced measures to boost the supply of dollars.
“Merkel’s comment confirmed investors’ concerns that there is no short-term solution to the European debt crisis,” said Kim Doo-hyun, a senior currency dealer at Korea Exchange Bank in Seoul.
The Asian Dollar Index fell 1 percent this week, its biggest decline in two months. The won slid 2.2 percent to 1,164.20 per US dollar, the rupee slumped 1.8 percent to 52.2550 and the Philippine peso dropped 1.3 percent to 43.94.
The New Taiwan dollar dropped 0.7 percent this week to NT$30.46 versus the greenback, touching a six-week low of NT$30.505 on Friday. Taiwan’s Directorate-General of Budget, Accounting and Statistics said on Thursday it expects GDP to climb 4.51 percent this year and 4.19 percent next year, less than previous predictions for gains of 4.56 percent and 4.38 percent.
Global investors pulled more than US$2.5 billion this week from stocks in South Korea and Taiwan, exchange data show. They also sold US$485 million more Indian equities than they bought in the three days through Wednesday. China’s yuan fell 0.3 percent to 6.3750 per US dollar, its biggest weekly loss in 10 months.
The won dropped for a fourth week before trade figures due next week that are expected to show export growth this month stayed near a two-year low of 8 percent reported for last month.
The rupee has lost 6.9 percent this month, prompting the Indian central bank to this week loosen rules for companies to borrow abroad and sell foreign currencies through swaps. The monetary authority also raised interest rates on bank deposits for Indians living overseas.
Malaysia’s ringgit fell 1.2 percent this week to 3.2003 per US dollar, after touching a seven-week low of 3.2019 on Friday, while Thailand’s baht slid 1.3 percent this week to 31.41 per US dollar and Indonesia’s rupiah dropped 0.4 percent to 9,055.
EURO’S LOSING STRETCH
The euro slid for a fourth week, its longest losing streak versus the US dollar in 18 months, as Germany’s struggle with a bond auction signaled Europe’s debt crisis is touching the region’s most fiscally sound nations.
The shared currency fell for a third week against the yen as Belgium’s credit rating was downgraded and before the nation auctions securities next week, including 10-year debt. Italy and France will also sell bonds next week. The US dollar gained against all of its most-traded peers after the US Congress’ so-called budget “supercommittee” failed to reach agreement on cutting the US deficit, sending investors to the safety of US Treasuries.
“The conditions in the foreign-exchange market caught up this week with the conditions in the credit market,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London, on Friday. “Before, there was a lot of selling of periphery paper for core paper, but if Germany goes, there’s no more core paper to buy — the capital leaves the euro area.”
The euro dropped 2.1 percent to US$1.3239 on Friday in New York, from US$1.3525 on Nov. 18. It last fell for four weeks in May last year. The shared currency sank 1.1 percent to ￥102.91. The greenback gained for the first time in three weeks against the Japanese currency, appreciating 1.1 percent to ￥77.73.
The euro touched a seven-week low against the greenback on Friday after Italy sold 8 billion euros (US$10.6 billion) of 183-day bills at a rate of 6.504 percent, the highest since August 1997. The auction came two days after Germany, Europe’s biggest economy, missed its 6 billion euro maximum sales target at a 10-year bond auction by 35 percent.
“This crisis isn’t specific to the periphery any more and there is this constant reminder that officials don’t have any real solution on the table,” said Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc, a currency brokerage, on Friday. “There is mounting concern about officials and their ability to get a handle on the crisis.”
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