Asia Currencies Post Weekly Drops as Europe Debt Crisis Spreads

May 8 (Bloomberg) -- Asian currencies tumbled this week, with South Korea’s won and the Philippine peso posting their biggest losses in more than a year, as Europe’s debt crisis drove investors from riskier assets.

The MSCI Asia-Pacific Index of regional shares had its worst week since February 2009 and the cost of protecting the region’s corporate bonds from default rose the most in 14 months. Greece’s Finance Minister George Papaconstantinou said May 6 the nation has insufficient funds to pay 8.5 billion euros ($10.8 billion) of debt due this month and Moody’s Investors Service said Europe’s fiscal crisis may threaten banks in Portugal, Spain, Italy, the U.K. and Ireland.

“Asian stocks and currencies are typical riskier assets and so they got sold aggressively,” said Minori Uchida, senior analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest bank. “Asian currencies are also hit harder than other emerging markets because the region largely depends on external demand and anything threatening the global economy means a sell for Asian currencies.”

The won declined 4.1 percent this week to 1,155.45 per dollar and the peso slid 2.4 percent to 45.535. Malaysia’s ringgit dropped 2.7 percent, the most since a dollar peg ended in 2005. Indonesia’s rupiah gained 0.1 percent to 9,225 yesterday, trimming its weekly loss to 2.4 percent, on suspected intervention by the central bank.

Intervention

Bank Indonesia will ensure a “stable” rupiah and doesn’t plan to impose capital controls, central bank Deputy Governor Budi Mulya said yesterday. The monetary authority “is always in the market to smooth currency volatility,” said Lindawati Susanto, head of foreign-exchange trading at PT Bank Resona Perdania in Jakarta.

India’s rupee also pared losses yesterday on suspected intervention, after touching a two-month low of 45.725 per dollar. The currency declined 2.5 percent to 45.4800 this week.

“The Reserve Bank of India has supported the rupee intermittently since yesterday as things move from bad to worse in global financial markets,” said J. Moses Harding, a Mumbai- based executive vice president at IndusInd Bank Ltd. “I think the RBI is only trying to cushion currency weakness and check volatility rather than influence its direction.”

In Taiwan, traders said the central bank sold the local currency in the final minutes of trading yesterday to help weaken it. The island’s dollar declined 1.4 percent this week to NT$31.85 versus the greenback. It slid 0.3 percent yesterday, having been little changed at NT$31.73 two minutes before the end of the trading session.

Stock Outflows

Investors pulled “modest” amounts of money from equity funds investing in Asia’s emerging markets in the week ended May 5, while funds focused on Taiwan recorded the biggest outflows since the third quarter of 2009, according to EPFR Global. Foreign investors sold $885 million more Korean equities than they bought in the first four days of this week and pulled $1.4 billion from Taiwan’s stocks, exchange data show.

“While Asia is much stronger than Europe in terms of the fiscal position, markets will nevertheless be affected by deleveraging flows away from emerging markets as an asset class,” Frances Cheung, a Hong Kong-based senior rates strategist at Credit Agricole CIB, wrote in a research note yesterday.

Elsewhere in Asia, Singapore’s dollar dropped 1.9 percent this week to S$1.3933 and the Thai baht was little changed at 32.35.