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Thursday, 6 December 2012
Asian Currencies Retreat on U.S. Fiscal Cliff; Rupee Rallies
By David Yong - Dec 7, 2012 8:06 AM GMT+0400
Asian currencies retreated from a 15- month high this week as U.S. lawmakers struggled to agree budget revisions needed to avert $607 billion of automatic spending cuts and tax increases in the world’s biggest economy.
The Bloomberg-JPMorgan Asia Dollar Index, having gained in each of the last six months, halted its advance as Malaysia’s ringgit was set for the biggest weekly loss since September. President Barack Obama said Dec. 5 that the global economy remains “soft” and the deadlock in Washington over taxes and spending is holding the U.S. back from leading a strong recovery. European Central Bank President Mario Draghi said the region’s economy will shrink more than predicted.
“As we head into year-end, the discussions on the fiscal cliff become more intense, so that would probably prompt some flight to safety,” said Enrico Tanuwidjaja, an economist at Royal Bank of Scotland Group Plc in Singapore. “Inevitably, the external headwinds will hit Asian growth.”
The ringgit weakened 0.4 percent this week to 3.0508 per dollar as of 11:30 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. Indonesia’s rupiah fell 0.3 percent to 9,625 and the Philippine peso declined 0.1 percent to 40.933. India’s rupee advanced 0.2 percent to 54.1375 after lawmakers endorsed a plan to open the market to foreign retailers.
The Asia Dollar Index, which tracks the region’s 10 most- active currencies excluding the yen, was little changed, after reaching 118.26 on Nov. 30, the highest level since September 2011.
A few dozen Republicans joined a bipartisan push to break an impasse between Obama and House Speaker John Boehner over taxes for the highest-earning Americans. Draghi said the euro- area’s economy will shrink 0.5 percent this year, more than the 0.4 percent contraction predicted in September.
“Draghi’s words mean the recovery will be slower than previously expected, damping exports toEurope,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “More regional central banks are getting a bit more aggressive in intervening in the market to protect the recovery in exports.”
The Philippine central bank said on Dec. 3 capital controls may be part of steps to deal with inflows. South Korea’s market regulators are reviewing further foreign-exchange curbs after tightening limits on currency forwards in November, Kim Seok Dong, chairman of the Financial Services Commission, said last week.
India’s rupee was set for a second weekly advance after lawmakers voted in favor of a government decision to open the retailing sector to the likes of Wal-Mart Stores Inc. and Tesco Plc, a move that will attract investment from abroad.
“This currency continues to outperform on reform hopes,” Mitul Kotecha, head of global currency strategy at Credit Agricole CIB, said in a note to clients today. “The passage was encouraging. Further gains in the rupee are seen over coming sessions.”
Elsewhere, China’s yuan was little changed at 6.2301 per dollar versus 6.2300 a week ago, according to China Foreign Exchange Trade System. Thailand’s baht traded at 30.67 per dollar, little changed from 30.69 on Nov. 30. South Korea’s won gained less than 0.1 percent to 1,082.40 and Taiwan’s dollar climbed 0.2 percent to NT$29.06.