Asian Currencies Drop for a Second Week on Recovery Concerns

Oct. 31 (Bloomberg) -- Asian currencies declined for a second week, led by the Indonesian rupiah and Indian rupee, as unexpected slides in U.S. home sales and consumer confidence fueled concern about the speed of a global economic recovery.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, sank to its lowest level this month as investors favored safer bets than emerging-market assets. The benchmark recouped some of its losses in the latter part of the week as reports showing the first U.S. economic growth in a year and falling unemployment in Japan brightened the outlook for exports.

“Risk aversion was weighing down sentiment on Asian currencies but the long-term view still holds,” said Penn Nee Chow, an economist in Singapore at United Overseas Bank Ltd. “Asian currencies will continue to gain against the U.S. dollar as the outlook improves. A lot of Asian economies are expected to come back to year-on-year growth in the fourth quarter.”

The rupiah dropped 1.6 percent this week to 9,585 per dollar, India’s rupee fell 1.0 percent to 46.9729 and the Malaysian ringgit slid 0.9 percent to 3.4138. All three were still up for the month.

The Asia Dollar Index had a weekly loss of 0.2 percent and the MSCI Asia-Pacific Index of shares dropped 2.6 percent. Emerging-market equity funds’ net inflows fell to $2.2 billion in the week to Oct. 28, after averaging $4.4 billion over the previous two weeks, according to research firm EPFR Global.

Below-Average Growth

The International Monetary Fund on Oct. 29 said the region’s governments must maintain fiscal support for their economies as demand for their exports will remain sluggish. Growth in Asia including Japan, Australia and New Zealand will probably accelerate to 5.8 percent next year from 2.8 percent in 2009, “well below” the 6.8 percent average of the past decade, the Washington-based lender said.

The U.S. economy, the world’s biggest, grew at a 3.5 percent pace in the third quarter after a 0.7 percent slump in the preceding three months, the Commerce Department said Oct. 29. Japan’s jobless rate slid to a four-month low of 5.3 percent in September, the statistics bureau announced yesterday.

The Korean won ended the week 0.1 percent lower at 1,182.05 in Seoul. The currency, which has strengthened 9 percent in the past six months, reached a five-week low of 1,205.75 per dollar on Oct. 29.

“The U.S. gross domestic product in particular points out a lot of good indications,” said Mirza Baig, a currency strategist in Singapore at Deutsche Bank AG, the world’s biggest trader of foreign exchange. “It will support risk appetite in the near term. The won has gone back above 1,200, which was a resistance level.”

Elsewhere, the Philippine peso fell 1.3 percent this week to 47.595. The Singapore dollar dropped 0.3 percent to S$1.3978 and Taiwan’s dollar declined 0.4 percent to NT$32.535. The Thai baht was little changed at 33.43.