The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-active currencies excluding the yen, slipped 0.2 percent this week. It reached a seven-month high on May 22. The yen tumbled 1.6 percent to 96.34 per dollar as rising yields on U.S. Treasuries and signs a global recession is easing prompted Japanese investors to send more funds abroad in search of better returns. The yield on benchmark 10-year Treasuries was 3.61 percent, about half a percentage point higher than at the end of April. Japan today reported its biggest increase in industrial output in 56 years and a U.S. report earlier this week showed consumer confidence there jumped the most in six years.
Deficit, Economic Slump
Indonesia’s rupiah fell 0.5 percent this week to 10,290 per dollar on speculation importers increased dollar purchases to settle bills and debt payments. “The rupiah was weaker due to the month-end demand for dollars from importers,” said Joanna Tan , an economist at Forecast Pte in Singapore. “Regional sentiment this week is also not too positive as North Korea’s nuclear test triggered some risk aversion.” The rupiah may trade between 10,300 and 10,400 next week, Tan said. The Philippine peso dropped on concern public finances will deteriorate as the economy contracts. Economic Planning Secretary Ralph Recto said today the budget deficit may exceed 250 billion pesos ($5.3 billion) this year, more than the official 199 billion peso estimate and 2002’s record shortfall of 211 billion pesos.The central bank yesterday lowered its benchmark interest rate by a quarter of a percentage point to a 17-year low of 4.25 percent after a government report showed the economy shrank in the first quarter at the fastest pace since at least 1994.“Peso weakness has been more pronounced given our outlook,” said Marcelo Ayes, a senior vice president at Rizal Commercial Banking Corp. in Manila.
Shrinking Economy
Malaysia’s ringgit completed a weekly decline after the central bank on May 27 said gross domestic product shrank 6.2 percent from a year earlier in the first quarter, more than the 3.9 percent decline predicted by economists in a Bloomberg News survey.
The economy may contract as much as 5 percent this year, Prime Minister Najib Razak announced yesterday. The government estimated in March that GDP would slide no more than 1 percent.Elsewhere, the Singapore dollar dropped 0.4 percent to S$1.4472. China’s yuan declined 0.07 percent to 6.8281, the biggest slide in two months, before the nation’s financial markets closed for a public holiday yesterday and today.
India Beats Estimate
India’s rupee rose 0.8 percent, trimming losses this week to 0.4 percent, after the economy expanded more than expected in the first quarter. The currency gained 6 percent in May, Asia’s best performer excluding the yen. Asia’s third-largest economy expanded 5.8 percent last quarter from a year earlier, beating the median 5 percent forecast by economists in a Bloomberg News survey. Finance Minister Pranab Mukherjee this week pledged to boost spending in July’s budget, noting that the economy is already showing “some signs” of revival from interest-rate cuts and stimulus spending.Thailand’s baht was little changed for the week at 34.36 per dollar. The currency appreciated 2.8 percent this month, the third-biggest gain among Asia’s 10-most active currencies, as overseas investors bought $230 million more Thai shares than they sold. The central bank has “intervened” in the foreign-exchange market to stabilize the baht, Amara Sriphayak, a Bank of Thailand official, said today in Bangkok. The Bank of Thailand “has managed the baht to curb its volatility,” she said, without detailing the currency purchases or sales.
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