By Lilian Karunungan - Sep 10, 2011 5:36 AM GMT+0700
Asian currencies fell this week, led by slides in the Singapore dollar and India’s rupee, as a faltering U.S. recovery and Europe’s debt crisis prompted investors to favor safer bets than emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index had its biggest weekly loss this year after global funds pulled $2.3 billion from shares in South Korea and Taiwan in the first four days of the week. Central banks in Korea, Indonesia, the Philippines and Malaysia held off from raising interest rates at policy reviews on Sept. 8 after the U.S. reported zero jobs growth for August. The European Central Bank also left borrowing costs unchanged and cut its growth forecasts for the region.
“The ECB seems to be quite worried about the slowdown in economic activity in Europe and that is casting a pall on risk sentiment globally,” said Nick Verdi, a Singapore-based currency strategist at Barclays Capital. “The U.S. labor market is very weak. Market participants were trying to weigh up whether the Fed will enact further monetary stimulus.”
The Singapore dollar fell 1.7 percent this week to S$1.2244 against its U.S. counterpart, according to data compiled by Bloomberg. The rupee weakened 1.7 percent to 46.5650, South Korea’s won dropped 2 percent to 1,084.10 and Malaysia’s ringgit declined 1.5 percent to 3.0095.
The Asia Dollar Index, which tracks the region’s 10 most- active currencies excluding the yen, dropped 0.99 percent in the past five days, the most since the week ended Nov. 26.
U.S., Europe
Concern the U.S. economy will slip into a recession prompted President Barack Obama to unveil a $447 billion plan to Congress on Sept. 8 to create jobs through tax cuts and infrastructure spending. The ECB cut its 2011 growth forecast on Sept. 8 to 1.6 percent, from 1.9 percent, and its projection for 2012 to 1.3 percent from 1.7 percent.
Finance ministers from the Group of Seven nations, meeting yesterday in Marseille, France, said concerns about the future of a global economic recovery highlight the need for policy makers to support growth. They agreed to “take all necessary actions to ensure the resilience of banking systems and financial markets.”
The ECB, the Bank of Japan and the Federal Reserve may implement coordinated monetary-policy easing to tackle weak growth, Morgan Stanley economists wrote in a Sept. 7 note to investors. Fed Chairman Ben S. Bernanke refrained from signaling plans for further stimulus in a speech on Sept. 8 in Minneapolis.
“Speeches made by Bernanke and Obama were in line with expectations, and not enough to surprise the market,” said Kim Sung Soon, a Seoul-based senior currency trader at the Industrial Bank of Korea. “The lingering uncertainty in global financial markets is putting downward pressure on the won.”
‘External’ Risks
South Korean President Lee Myung Bak said Sept. 8 that inflation may exceed the 4 percent target this year, adding it’s hard to find ways to curb consumer-price gains. The Bank of Korea kept the benchmark interest rate unchanged at 3.25 percent for a third month on Sept. 8 and said it may not be able to increase borrowing costs until “external” factors such as Europe’s debt crisis are under control.
The ringgit had its biggest weekly loss in a month after government data showed that Malaysia’s export growth moderated to 7.1 percent in July from 9.6 percent the previous month.
“Prolonged uncertainties in the financial markets, weakness in the labor market and the prevailing fiscal conditions in the advanced economies have heightened the downside risks and fragility of the global economy,” Bank Negara said in its policy statement on Sept. 8. “In the domestic economy, recent indicators point to slower growth in external demand.”
Export Slump
Taiwan’s dollar completed its biggest weekly decline since February, sliding 0.9 percent to NT$29.265 versus the greenback. The island’s overseas sales rose 7.2 percent in August from a year earlier, the least since they last declined in October 2009, the Ministry of Finance reported this week. Economists expected a 15.5 percent increase, a Bloomberg survey showed.
Elsewhere, the Philippine peso declined 0.7 percent to 42.438 per dollar and Thailand’s baht fell 0.5 percent to 30.07. China’s yuan lost 0.09 percent to 6.3882, while Indonesia’s dropped 0.8 percent to 8,588 from Aug. 26. Financial markets in Southeast Asia’s biggest economy were shut for a holiday in the week ended Sept. 2.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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