India’s rupee and South Korea’s won led declines in Asian currencies this week on signs the European debt crisis is starting to slow regional economic growth.
The MSCI Asia-Pacific Index of stocks dropped the most in a month on concern eurozone leaders would fail to agree on a new package aimed at stemming the crisis and boosting confidence in financial markets. Malaysia reported on Friday that export growth slowed in October, while Japanese data showed the economy expanded less than the initial estimate last quarter.
“We are seeing the risk-off mood and emerging-market currencies are under pressure,” said Minori Uchida, a senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd. “There’s concern about a global slowdown.”
The rupee declined 1.6 percent this week to 52.0425 per US dollar in Mumbai. The won weakened 1.4 percent to 1,146.83, Malaysia’s ringgit dropped 1 percent to 3.1513 and Indonesia’s rupiah fell 0.3 percent to 9,080.
“All eyes have been on the eurozone because that will determine the capital flows into emerging markets,” said Radhika Rao, an economist at Forecast Pte in Singapore.
China’s yuan declined this week on speculation policymakers would slow currency appreciation after inflation cooled to the least in 14 months. Consumer prices rose 4.2 percent last month from a year earlier after increasing 5.5 percent the previous month, the Chinese National Bureau of Statistics said on Friday.
The yuan fell 0.08 percent to 6.3647 per US dollar this week in Shanghai, according to the China Foreign Exchange Trade System. The People’s Bank of China set the daily reference rate 0.05 percent lower at 6.3352 on Friday, the weakest level since Thursday last week. The currency is allowed to fluctuate as much as 0.5 percent on either side of the fixing.
“Easing inflation implies there’ll be less room for yuan appreciation,” said Edmond Law, deputy head of foreign exchange at BWC Capital Markets (寶華世紀資本市場) in Hong Kong. “Officials will now shift their focus to protecting economic growth amid the increasingly uncertain global outlook. The inflation data confirms further monetary easing is likely.”
Elsewhere, the New Taiwan dollar fell 0.3 percent to NT$30.239 per US dollar this week, the Philippine peso dropped 0.8 percent to 43.63. Thailand’s baht declined 0.5 percent to 30.94 and Singapore’s dollar weakened 1.1 percent to S$1.2981.
Traders were also betting on a stronger US dollar, as sentiment was further dampened after the European Central Bank (ECB) refused to commit to bond purchases to aid the debt-ridden members, dealers in Taipei said.
As Taiwan’s exports last month fell 8.7 percent from a month earlier, worries have been running deeper that the European financial crisis would further affect the already fragile economic fundamentals and hurt global demand, according to the dealers.
The NT dollar showed its weakness in line with most of its counterparts in Asia, in particular the won, they said.
EURO WEAKENS
The euro fell against the majority of its most-traded counterparts after an EU agreement for tighter fiscal controls failed to convince investors the region’s two-year financial crisis is closer to a resolution.
The 17-nation currency weakened for the fifth week in the past six against the US dollar on speculation leaders would struggle to institute tougher anti-deficit rules and as ECB President Mario Draghi damped speculation the central bank would step up its bond-buying.
The pound was one of the best performers this week as UK Prime Minister David Cameron said he would not sacrifice sovereignty to save the euro. The Dollar Index fell for a second week amid better-than-forecast economic data before the US Federal Reserve meets on Tuesday.
“The ECB and Draghi were not inclined to really participate more aggressively in sovereign bond markets,” said Jens Nordvig, a managing director of currency research in New York at Nomura Holdings Inc, on Friday. “The key thing for the market is whether this is something that’s going to trigger more aggressive balance sheet use by the ECB. If we don’t have the ECB stepping in, it’s hard for the market to stabilize.”
The euro fell 0.1 percent to US$1.3386 from US$1.3391 on Dec. 2, after touching a one-week low of US$1.3282 on Friday. The shared currency declined 0.5 percent to ￥103.89 and the Japanese currency gained 0.4 percent to ￥77.65 per US dollar.
IntercontinentalExchange Inc’s Dollar Index dropped four times in five days as signs the world’s biggest economy would avoid a recession reduced investor appetite for safer investments. The gauge, which IntercontinentalExchange uses to measure the greenback against six currencies, fell 0.1 percent to 78.593.
Sterling rose 0.5 percent to US$1.5671 and gained 0.1 percent to ￡0.8543 per euro as Britain will stay outside of the EU budget agreement.
Bank of England policymakers kept the benchmark interest rate at a record low 0.5 percent on Thursday and their asset-buying target at ￡275 billion (US$431 billion). The central bank extended its bond-purchase program in October to help bolster the flagging economy.
Futures traders decreased their bets the euro would decline against the US dollar, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain — so-called net shorts — was 95,814 on Tuesday, compared with net shorts of 104,302 a week earlier.
The euro would weaken to US$1.30 by the end of the March next year, according to median forecast in a Bloomberg News survey of 42 economists and analysts. The shared currency would reach US$1.32 by the end of next year, the survey shows.
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