Asian currencies drop this week as global growth concerns mount

Asian currencies fell this week, led by India’s rupee and the Malaysian ringgit, as signs the world economy is deteriorating dimmed the outlook for regional exports and curbed demand for emerging-market assets.

Taiwan’s central bank left interest rates unchanged on June 21 and Governor Perng Fai-nan said there is a high risk of the global outlook worsening. The Federal Reserve cut its 2012 US growth forecast this week and the Bank of Korea said its projection for South Korea may be lowered in July. Malaysia forecast that its services output will expand 5.1 per cent this year, less than the 6.8 per cent gain in 2011. Manufacturing in China, Asia’s biggest economy, may shrink for an eighth month in June, a preliminary purchasing managers index showed.

“Concern about Europe’s debt crisis is lingering in the market and on top of that there’s growing worry about the global economic slowdown,” said Kozo Hasegawa, a Bangkok-based trader at Sumitomo Mitsui Banking Corp. “Slowdowns in Europe, China and the US will clearly impact Asian exports and the regional currencies will continue to see some selling pressure.”

The rupee slumped 2.9 per cent this week to 57.1550 per dollar in Mumbai, touching a record low of 57.3275 yesterday, according to prices compiled by Bloomberg. Malaysia’s ringgit declined one per cent to 3.1933, while Thailand’s baht slid 0.9 per cent to 31.76. The Bloomberg-JPMorgan Asia Dollar Index fell 0.3 per cent.

Downgrades
The Fed lowered its 2012 US growth forecast to a range of 1.9 per cent to 2.4 per cent, from an April projection of 2.4 per cent to 2.9 per cent. Moody’s Investors Service downgraded 15 global banks, including JPMorgan Chase & Co, citing their exposure to financial market volatility. Leaders of the euro zone’s four biggest economies proposed a 130 billion euros ($163 billion) stimulus plan yesterday to shore up growth amid a regional debt crisis.

“We have to wait and see what happens in Europe and the US and whether China can achieve a soft landing,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd in Kuala Lumpur. “We will see risk aversion. There is anxiety regarding the financial sector worldwide after the US banks were downgraded.”

India ratings
The rupee had its biggest weekly drop since September after Fitch Ratings cut India’s sovereign credit-rating outlook to negative on June 18, joining Standard & Poor’s in signaling the country is at risk of losing its investment-grade status.

The Reserve Bank of India unexpectedly left the benchmark repurchase rate at eight per cent on the same day as the fastest inflation among the biggest emerging markets deterred policy makers from lowering borrowing costs.

The baht had its largest weekly decline in a month. The Bank of Thailand cut its 2012 export-growth forecast to about eight per cent from nine per cent due to the crisis in Europe. Exports gained 0.65 per cent in May after a decline of 3.67 per cent in April, while imports climbed eight per cent following a 7.87 per cent increase, according to median estimates of economists in Bloomberg News surveys before government data next week.

Elsewhere, Indonesia’s rupiah fell 0.6 per cent this week to 9,438 per dollar, the Philippine peso slid 0.5 per cent to 42.45 and Taiwan’s currency slipped 0.2 per cent to NT$29.931. China’s yuan ended the week at 6.3642, little changed from its June 15 close of 6.3651. South Korea’s won strengthened 0.8 per cent to 1,157.05, a fourth weekly advance.