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Saturday, March 27, 2010

Asian Currencies Decline for Week on Euro Region Debt Concerns

Asian currencies declined this week, led by the Singapore dollar and South Korean won, as discord among leaders in European nations on how to solve Greece’s debt woes curbed investor appetite for emerging- market assets.

The Bloomberg-JPMorgan Asia Dollar Index pared the week’s losses and the euro climbed from a 10-month low a day after European leaders endorsed a plan to assist Greece. Asian currencies and stocks weakened on March 25 after a Fitch Ratings downgrade of Portugal fanned concern Greece will not be alone in struggling to pay its debt.

“We’ve seen a big move in the euro on concerns in Greece, that’s led to a pretty buoyant dollar against Asian currencies across the board,” said Bernard Yeung, Hong Kong- based head of currency trading for Asia at National Australia Bank Ltd.

The won declined 0.5 percent for the week to 1,138.80 against the dollar in Seoul and yesterday touched 1,148.40, the lowest level since March 3. The Singapore dollar fell 0.6 percent to S$1.4043.

Leaders of the 16-nation euro region agreed on a Franco- German proposal in Brussels on March 25 for a mix of bilateral and International Monetary Fund loans for Greece at market interest rates. European Central Bank President Jean- Claude Trichet said he was “happy” a solution had been found, toning down earlier criticism over the IMF’s involvement.

Euro Gains

The euro advanced 1 percent to $1.3410 at 5 p.m. in New York yesterday, from $1.3272 on March 25, its lowest level since May. The Asia Dollar Index, which tracks the region’s 10 most-traded currencies, trimmed the week’s loss to 0.2 percent.
Central banks in Thailand and Taiwan this week stressed they will intervene in currency markets after their respective exchange rates reached the strongest levels in at least 18 months.
Bank of Thailand Governor Tarisa Watanagase said on March 25 that the central bank will act if the baht is “too volatile.” The currency has weakened 0.5 percent from its highest in 22 months touched a week ago.

The baht traded little changed yesterday at 32.43 against the dollar and dropped 0.4 percent from March 19, the first weekly slide in almost two months, according to data compiled by Bloomberg.

“The risks in the euro zone increased demand for the dollar and that puts downward pressure on Asian currencies,” said Hideki Hayashi, a global economist at Mizuho Securities Co. in Tokyo. “There has also been intervention concern after the recent appreciation in the baht.”

Taiwan Intervention
Taiwan’s dollar traded unchanged yesterday at NT$31.88 against the greenback, and fell 0.3 percent during the five- day period, according to Taipei Forex Inc. It has dropped 0.7 percent from a September 2008 high of NT$31.667 on March 18.

The Central Bank of the Republic of China (Taiwan) said on March 25 it will enter the currency market when necessary to “maintain order” if “irregular factors caused large fluctuations.”
“The central bank will intervene if the Taiwan dollar rises too fast,” said Tommy Huang, a fixed-income securities trader at Taiwan International Securities Corp. in Taipei. “It will probably accept slow appreciation.”

Indonesia’s rupiah posted its first weekly decline in almost two months on speculation Japanese manufacturers based in Indonesia were sending earnings home before the end of their fiscal year on March 31.

Japanese Companies

The currency reached a 19-month high on March 17 as overseas investors plowed funds into local stocks and bonds. The rupiah has since retreated 0.4 percent. The volatility is being “managed” by Bank Indonesia, according to Bambang Eko Joewono, head of the global-markets division at PT Bank UOB Buana.

“There’s some dollar demand from Japanese companies,” Jakarta-based Joewono said. “BI has been matching the flows coming from offshore” with demand for the greenback from oil company PT Pertamina and other state-owned firms, he said.

The rupiah fell 0.3 percent this week to 9,128 per dollar, while Malaysia’s ringgit lost 0.2 percent to 3.3070. The Philippine peso and China’s yuan were little changed at 45.507 and 6.8274, respectively.

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