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Asian currencies fall as risk appetite hit by global stock slump

Friday, February 12, 2016 - 14:21
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Asian currencies declined as global stocks extended a bear-market rout and the Japanese central bank stepped up its verbal warnings for intervention to weaken the yen.

[SINGAPORE] Asian currencies declined as global stocks extended a bear-market rout and the Japanese central bank stepped up its verbal warnings for intervention to weaken the yen.

As shares around the globe fell, demand for safe-haven assets pushed Japan's currency beyond 111 per US dollar on Thursday for the first time since Oct 2014 and prompted Finance Minister Taro Aso to say the authorities will respond to markets appropriately, if necessary, as recent movements in the yen have been rough.

The MSCI World Index of shares has slipped 20 per cent from its May record as concern abounds about the health of the world economy and the ability of central banks to prop it up.

Malaysia's ringgit fell one per cent to 4.1860 per US dollar as of 1:44 pm in Kuala Lumpur, data from local banks compiled by Bloomberg show. It was down 0.5 per cent in a shortened week after markets closed Monday and Tuesday for the Chinese New Year holiday.

The Thai baht and South Korean won both declined 0.7 per cent, with Thailand's currency weakening from Thursday's four-month high.

"Risk aversion is there and stock markets continue to go down," said Sook Mei Leong, Southeast Asia head of global markets research at Bank of Tokyo-Mitsubishi UFJ in Singapore.

"The ringgit reacted in line with other Asian currencies."

The sell-off in the baht was mainly due to short covering in the dollar because the Thai currency's earlier gains were overdone given the low economic growth and inflation, said Roong Sanguanruang, a market analyst in Bangkok at Bank of Ayudhya Pcl.

Malaysia's currency is showing more resilience to the drop in commodity prices, which fueled the biggest loss in the ringgit last year since 1997 as a slump in Brent crude cut government revenue for Asia's only major net oil exporter.

The ringgit has climbed 2.5 per cent in 2016, the second-best performance after the yen among the region's 11 most-traded currencies.

The flight to safety has spurred a 1.6 per cent gain in a measure of Malaysian government bonds this year. The 10-year yield dropped 14 basis points to 3.92 per cent on Friday, prices from Bursa Malaysia show.

The risk-off mood overshadowed a five per cent surge in Brent crude prices on Friday as they continued to hold above US$30 a barrel. Oil is still down more than 15 per cent this year after a 35 per cent plunge in 2015.

Elsewhere in Asian currency markets, the Indonesian rupiah and Philippine peso both declined 0.3 per cent. The offshore yuan dropped 0.2 per cent in Hong Kong before onshore trading resumes on Monday following the week-long Chinese New Year holidays.

Taiwan and Vietnam also remain shut until next week. 

BLOOMBERG