Rupee leads Asia currency declines this week on recovery concern

Asian currencies fell this week by the most in more than a month, as worse-than-projected data from the US heightened concern the global recovery is stalling, damping the outlook for the region’s exports.

The rupee reached the lowest since December, while Indonesia’s rupiah dropped to a level last seen in June 2010 as regional stocks fell to a one-week low. Reports this week showed the euro-area jobless rate rose to 10.9 per cent in March, the highest since April 1997, and the services industry in the US grew slower than economists predicted in April, as consumer confidence waned.

Australia’s central bank cut its growth forecast yesterday, citing weaker job and housing markets. “The currency market is driven by data which has been mixed and not pointing to a sharp recovery,” said Jackit Wong, a regional economist at Natixis Asia Ltd in Hong Kong. “It will disappoint people looking to the US to compensate for a recession in Europe or a slowdown in China.”

The rupee slumped 2.4 per cent to 53.48 per dollar in Mumbai from a week ago, according to data compiled by Bloomberg. Thailand’s baht lost 0.7 per cent to 30.98 for its worst five-days of 2012 and the rupiah dropped 0.7 per cent to 9,247 after trading as low as 9,266. The Bloomberg-JPMorgan Asia Dollar Index fell 0.32 per cent this week, the most since a 0.33 per cent drop in the period ended March 23. Its 60-day historical volatility declined to 2.72 per cent from 2.79 per cent on April 27.

Job report
The rupee’s plunge “reflects the weakening of India’s fundamentals caused by the continued wide deficit in trade of goods, and simultaneous outflows of foreign funds,” Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB, wrote in a report on Saturday. “It will take either regulatory measures or heavy central bank intervention to change the trend.”

The US Institute for Supply Management said yesterday its non-manufacturing index fell to a four-month low of 53.5 in April. Three Federal Reserve presidents said they don’t see the need for a new round of bond-buying, denting prospects for further fund inflows into emerging-market assets. The Reserve Bank of Australia forecast economic growth of 3 per cent for 2012, compared with a 3.5 per cent estimate in February, in its quarterly policy statement.

China’s yuan gained 0.06 per cent to 6.3062 per dollar from a week ago, as the US-China strategic economic dialogue continued in Beijing. Commerce Minister Chen Deming said on Thursday the nation will post a trade surplus of more than $10 billion in April, compared with the $9.9 billion median estimate of 14 analysts surveyed by Bloomberg News before the data due on May 10.