Asia Currencies Drop, Led by Ringgit, Italy, Spain Ratings

Asian currencies weakened after Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal, sapping demand for riskier assets.

The uncertainty over the euro area’s prospects for changing its fiscal and economic framework is among the main drivers of the action, the ratings company said yesterday. Data tomorrow may show Malaysian economic growth cooled as Europe’s debt crisis hurt exports and South Korea’s jobless rate rose to 3.2 percent in January from 3.1 percent the previous month.

The JPMorgan Asia Dollar Index (ADXY), which tracks the region’s 10 most-active currencies excluding the yen, fell 0.2 percent as of 4:03 p.m. in Hong Kong. Indonesia’s rupiah slumped 0.8 percent to 9,068 per dollar and the Philippine peso dropped 0.7 percent to 42.745. Malaysia’s ringgit plunged 0.7 percent to 3.0463.

“Europe’s downgrades are hurting risk-taking,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “It’s quite worrying that the austerity measures taken by these European countries will eventually hurt demand for Asia’s exports.”

Euro-area finance chiefs will convene in Brussels tomorrow to decide whether to ratify a 130 billion-euro ($171 billion) rescue package for Greece.

The rupiah weakened by the most since Nov. 28. Indonesia may lower its 2012 growth target from 6.7 percent, Vice Finance Minister Anny Ratnawati said today without saying what the new estimate will be.

The ringgit touched 3.0535 per dollar, the lowest level in two weeks, before a report tomorrow that is expected to show gross domestic product expanded 4.8 percent from a year earlier in the last three months of 2011. That compares with 5.8 percent growth in the previous quarter.

“Moody’s downgrade is affecting market sentiment,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd. in Kuala Lumpur. “The Malaysian currency could weaken to 3.05 to the dollar because people are cautious and may want to take some profit.”

South Korea’s won traded near a two-week low, slipping 0.2 percent to 1,123.78 per dollar.

“Negative news from Europe is putting downward pressure on the won,” said Yu Won Jun, a Seoul-based currency dealer at Korea Exchange Bank. “Still, exporters are waiting to sell the dollar as the won weakens, and this will limit won declines.”

Taiwan’s dollar weakened 0.2 percent to NT$29.595 after global funds sold $142 million more local shares than they bought yesterday, according to exchange data. The island’s exports slumped 16.8 percent in January from a year earlier, after rising 0.6 percent the previous month, the government reported last week.

China’s yuan was little changed at 6.2999 per dollar ahead of a meeting between Vice President Xi Jinping and U.S. President Barack Obama today. China will continue to improve reform of the yuan’s exchange-rate mechanism, the official Xinhua News Agency reported yesterday, citing Xi in an interview with the Washington Post. Xi, who is expected to become China’s next president, will meet Obama in Washington today before traveling to Iowa and Los Angeles.

“The ratings cut in Europe is just negative to market sentiment rather than a shock to investors,” said Kenix Lai, a currency analyst at Bank of East Asia Ltd. in Hong Kong. “Investors on the yuan will focus on any outcomes from today’s meeting between Xi and Obama for implications on appreciation.”

Elsewhere, the Indian rupee fell 0.2 percent to 49.315 per dollar and the Thai baht weakened 0.2 percent to 30.87.