Asian currencies fell after a report showed the expansion in China’s manufacturing slowed to the least in three months, raising concern Europe’s credit crisis is cooling demand for exports.
“This could be the first sign of China feeling the slowdown in Europe, and that’s going to affect the rest of Asia as well,” said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. “You can’t expect super- strong currency appreciation in the second half.”
The won dropped 0.6 percent to 1,209.10 per dollar as of 1:06 p.m. in Seoul, following last month’s loss of 7.9 percent, according to data compiled by Bloomberg. The ringgit slid 0.6 percent to 3.2810, after falling 2.4 percent in May. The monthly declines in both currencies were the biggest since February 2009.
China’s Purchasing Managers’ Index fell to 53.9 in May from 55.7 in April, the Federation of Logistics and Purchasing said today. The European Commission said yesterday its gauge of executive and consumer sentiment in the 16 nations using the euro fell last month.
Fingers Burnt
The Bloomberg-JPMorgan Asia Dollar Index dropped 0.2 percent, extending a 2.1 percent decline in May, as funds based abroad pulled $4.1 billion from Taiwan equities and $1.8 billion from Thailand. Tensions on the Korean peninsula also discouraged investors, who sold a net $5.1 billion of shares last month. Indonesia’s rupiah added to its biggest slump in May since February 2009 as $178 million was taken out of stocks.
“Too many fingers have been burnt in the $5 billion pulled out of Korean equities last month, so I don’t see foreign investors rushing back in,” said Sean Callow, a currency strategist at Westpac Banking Corp. in Sydney. “That’ll work against Korean equities and against the won, which is one of the most sensitive currencies to global sentiment.”
Taiwan’s dollar appreciated on speculation exporters are taking the opportunity of almost daily market intervention by the central bank to convert overseas earnings at more favorable exchange rates.
Taiwan Reserves
The island’s foreign-exchange reserves climbed to $358 billion in April, the highest on record, as the monetary authority bought the greenback to cap strength in the local dollar and keep its goods competitive abroad. Traders familiar with the central bank’s operations, who declined to be identified, said the Taiwan dollar was sold on most days over the past month.
The currency rose 0.2 percent to NT$32.149 against its U.S. counterpart, according to Taipei Forex Inc., after dropping 2.5 percent last month, its worst performance since February 2009.
“Some exporters want to sell their dollars,” said Hao-Yun Juan, a currency trader at Kingstown Bank in Taipei. “They see the exchange rate is high enough to sell because of central bank intervention.”
Fading prospects policy makers will increase interest rates also damped demand for Asian currencies. Thailand’s central bank will probably keep borrowing costs at 1.25 percent tomorrow, according to all 13 economists surveyed by Bloomberg. The Philippines is forecast to hold its benchmark rate at 4 percent, and Bank Indonesia’s reference rate will remain at 6.5 percent.
The rupiah fell 0.4 percent to 9,215 per dollar, according to data compiled by Bloomberg. The currency dropped 1.8 percent last month as the Jakarta Composite Index slumped 5.9 percent, its worst month since October 2008.
“It’s still the same issues affecting the rupiah, with concern over Europe affecting global stock markets, including Asia,” said Lindawati Susanto, head of foreign-exchange trading at PT Bank Resona Perdania in Jakarta.
Elsewhere in Asia, the Philippine peso dropped 0.3 percent to 46.438 per dollar and Singapore’s currency fell 0.2 percent to S$1.4029. Thailand’s baht was little changed at 32.52.
Source :- businessweek.com