Friday, May 15, 2009

Asian Currencies Drop as Stocks Falter on Dim Recovery Outlook

Asian currencies, led by South Korea’s won, declined this week after a rally in regional stocks faltered on signs the global recession is far from easing.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, fell this week for the first time in a month and the MSCI Asia Pacific Index of shares snapped a two-week rally. Europe’s economy contracted at the fastest pace in at least 13 years in the first quarter, while state-run Korea Development Institute expects the economy will shrink 2.3 percent in 2009, the first time in more than a decade.

“The correction we’ve seen in global equities this week probably hasn’t finished yet,” said Dariusz Kowalczyk, a strategist with SJS Markets Ltd. in Hong Kong. “There’s room for further risk aversion which would be negative for Asian emerging currencies.”

The won, Asia’s best-performing currency in the past month, declined 0.8 percent this week to 1,257 per dollar in Seoul. The Philippine peso weakened 0.8 percent to 47.635, while the Malaysian ringgit fell 0.9 percent to 3.5495.

Initial U.S. jobless claims rose by 32,000 to 637,000 in the week ended May 9, the Labor Department said this week, 27,000 more than estimated in a Bloomberg survey of economists. The bankruptcy of Chrysler LLC may cause further job losses.

Gross domestic product in the 16-member euro region dropped 2.5 percent from the fourth quarter, when it fell 1.6 percent, the European Union’s statistics office said yesterday. That’s the biggest slide since the euro-area GDP data were first compiled in 1995.

‘Pretty Bloody’

Indonesia, Southeast Asia’s biggest economy, expanded 4.4 percent last quarter, the slowest pace in five years, the government reported yesterday. Singapore’s economy shrank the most since at least 1975 in the same quarter and Thailand’s Finance Minister Korn Chatikavanij estimates a “pretty bloody” GDP contraction of as much as 6 percent in the same period.

The peso ended a two-week rally on speculation oil companies are purchasing dollars to pay for imports.

The currency has declined 1.3 percent since touching a three-month high reached on May 11 after the tax bureau said revenue fell short of target in April, spurring concern that the government will fail to narrow its budget deficit.

Weak economic reports are “unlikely to shake up the growing seeds of risk appetite,” said Thio Chin Loo, a senior currency analyst at BNP Paribas SA in Singapore. “A lot would still want to jump into this green shoots bandwagon. I can sense that markets are going to take more and more risks.”

Taiwan Dollar

Taiwan’s dollar completed a fourth winning week on speculation warming relations with China will draw investment and help pull the economy out of a recession.

The currency’s gains were tempered as global funds sold $1.1 billion more local shares than they bought this week. The benchmark Taiex index of stocks fell 1.4 percent for the week, ending a three-week rally.

“The structural dynamics remain good for Taiwan’s dollar,” said Wai Ho Leong, a regional economist at Barclays Capital Plc in Singapore, citing prospects that Asia will lead the global economic recovery. The selling of Taiwan shares is likely to be temporary, he said.

The island’s dollar rose 0.3 percent this week to NT$32.950 against the U.S. currency, according to Taipei Forex Inc. It touched NT$32.767 on May 13, the strongest level since Dec. 31.

Elsewhere, the Indonesian rupiah declined 0.6 percent this week to 10,438 a dollar, while Thailand’s baht jumped 0.9 percent to 34.56. China’s yuan traded at 6.8258 versus 6.8218 on May 8, while Singapore’s dollar was at S$1.4668, compared with S$1.4659.