Asian currencies weakened, led by Indonesia’s rupiah and Malaysia’s ringgit, as concern Europe’s debt crisis will worsen prompted investors to favor assets perceived safer than those in emerging markets.
The Bloomberg-JPMorgan Asia Dollar Index fell for a fourth day before German Chancellor Angela Merkel and French President Nicolas Sarkozy meet in Berlin today to craft a plan for rescuing the euro over the next three months. Economists predict trade data this week will show Philippine (PHEXYOY) exports shrank for a seventh month and Malaysian shipments (MAETEYOY) rose in November at the slowest pace in three months, according to separate Bloomberg News surveys.
“Traders and investors are looking at Europe which still hasn’t gotten its act together,” said Lito Mercado, head of trading at Rizal Commercial Banking Corp. in Manila. “It will be a problem for growth, not just in Europe but globally. It will affect our own economies and currencies.”
The rupiah slumped 1.4 percent to 9,218 per dollar as of 10:11 a.m. in Jakarta, according to prices from local banks compiled by Bloomberg. The ringgit fell 0.5 percent to 3.1601, while the peso dropped 0.3 percent to 44.270. Thailand’s baht depreciated 0.4 percent to 31.80. The Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, declined 0.2 percent. The MSCI Asia Pacific Index (MXAP) of shares lost 0.4 percent, falling for a third day, after separate reports on Jan. 6 showed that European confidence in the economic outlook fell to the lowest in more than two years and German factory orders plunged the most in three years.
Indonesian Rates
The Indonesian currency fell to a six-week low before the central bank, which cut borrowing costs twice last quarter to spur economic growth, reviews them again this week. Bank Indonesia will keep the reference rate (IDBIRATE) unchanged at 6 percent on Jan. 12, according to eight out of 11 analysts surveyed by Bloomberg News. Three predict a reduction to 5.75 percent. The monetary authority sees room to reduce borrowing costs if needed, Deputy Governor Hartadi Sarwono said last week. “Europe’s debt crisis is causing risk aversion,” said Radhika Rao, an economist at Forecast Pte in Singapore. “We are not expecting any rate cut by Bank Indonesia this quarter. The last cut was premature.”
Ringgit Falls
The ringgit dropped the most in almost two weeks before a Jan. 11 report that may show exports rose 13.5 percent from a year earlier in November after a 15.8 percent gain the previous month, according to the median estimate of economists surveyed by Bloomberg News. Industrial production grew 3.7 percent after a 2.8 percent gain in October, a separate poll showed before data due tomorrow. “I expect the ringgit to weaken to 3.40 to the greenback by the end of the first quarter,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “Demand for the dollar will be strong.”
The peso declined for a third day before a government report tomorrow that may show overseas shipments dropped 8.5 percent in November from a year earlier, according to the median estimate of economists in a Bloomberg News survey. Elsewhere, South Korea’s won slid 0.1 percent to 1,164.30 against the dollar, while China’s yuan depreciated 0.13 percent to 6.3177. Taiwan’s dollar rose 0.1 percent to NT$30.219.