Indonesian Rupiah Leads Asian Currencies Lower on Risk Aversion

By Bob Chen

April 1 (Bloomberg) -- Asia currencies weakened, led by Indonesia’s rupiah, on concern a deepening global recession will curb investor demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, declined lower after reports showed U.S. consumer confidence and business sentiment in Japan are at or near record lows, while China’s manufacturing shrank for an eighth straight month. The rupiah today dropped as much as 1.5 percent before paring its losses on speculation Bank Indonesia intervened by buying the currency.

“The rupiah is seen as one of the more risky currencies and any risk aversion will certainly drive it down more than the rest,” said Rajeev Malik, a regional economist at Macquarie Group Ltd. in Singapore. “It’s quite possible that Bank Indonesia intervened although it’s usually in small amounts.”

The rupiah was 0.6 percent lower at 11,620 per dollar as of 11:26 a.m. in Jakarta, after earlier weakening to 11,730, according to data compiled by Bloomberg. The Korean won slid 0.4 percent to 1,388.75 and the Singapore dollar fell 0.2 percent to S$1.5231. The Asia Dollar Index declined 0.3 percent, after gaining 2.7 percent last month.

The Bank of Japan today said its Tankan index of sentiment among large makers of cars, electronics and other goods slid to the lowest level since the survey began in 1974. The CLSA China Purchasing Managers’ Index dropped to 44.8 last month, CLSA Asia-Pacific Markets said today in an e-mailed statement. A reading below 50 shows a contraction.

The World Bank, the Organization for Economic Cooperation and Development and the Asian Development Bank all cut economic growth projections yesterday. The ADB cut its estimate for Asia excluding Japan to 3.4 percent from 5.8 percent.

Korea Trade Surplus

The won earlier climbed as much as 2.2 percent after the government reported a record trade surplus for March, easing a shortage of foreign exchange needed to pay overseas debt. It jumped 11 percent last month, the best performance in the region.

“There is some fundamental change in sentiment towards the won as a swing to a current-account surplus helps cement the belief that the worst is over,” said Park Sang Bae, a currency dealer with Industrial Bank of Korea in Seoul. “There may be ups and downs as market players are swayed by the outside world.”

The nation’s exports exceeded imports by $4.6 billion last month, the government announced today. South Korea’s current- account balance showed a surplus of $3.68 billion for February, following a $1.64 billion deficit in January, the Bank of Korea said this week. The indicator, which tracks the flow of goods, services and investment income, may show a record $5 billion surplus for March, the bank said.

Taiwan-China Ties

Taiwan’s dollar climbed 0.4 percent to NT$33.775, after last month strengthening the most in a year, on optimism improving relations with mainland China will help stem a slide in exports. The island’s overseas sales dropped 29 percent from a year earlier in February, sliding for a sixth straight month.

“We’ve been seeing some positive risk appetite for emerging-market assets for the past few weeks, but this time the talks about stronger ties between Taiwan and China are justifying appetite for the currency,” said Sebastien Barbe, Hong Kong-based head of emerging-market strategy at Calyon, the investment-banking unit of France’s Credit Agricole SA.

Chinese and Taiwanese military officials will meet for the first time in August at a military exchange seminar in Hawaii organized by the U.S. Asia-Pacific Center for Security Studies under the U.S. Pacific Command, the Beijing-based China Daily said yesterday, citing an unidentified China defense official.

Elsewhere, the Philippine peso was little changed at 48.335 per dollar. The Thai baht dropped 0.1 percent to 35.50, Malaysia’s ringgit declined 0.1 percent to 3.6490 and India’s rupee gained 0.1 percent to 50.6650.

To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net.