Greek drama hits Asian currencies

SINGAPORE: Asian currencies had their third weekly decline, led by the Malaysian ringgit, amid concern that a global bond rout and Greece’s deferral of debt payments will reduce investor demand for emerging-market assets.

The Bloomberg-JPMorgan Asia Dollar Index fell 0.2% from the previous week as European Central Bank president Mario Draghi flagged faster euro-area inflation. Ten-year German bund yields climbed 40 basis points from May 29 as the rate on similar-maturity US Treasuries rose 23 basis points.

Investor attention turned to China as the influential US fund manager Bill Gross said that shares on the technology-heavy Shenzhen bourse were the next big trade for short sellers.

“The volatility in German yields drove global yields higher,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “That contributed to softer Asian currencies. Bill Gross’s statement that China stocks were the next big short affected market sentiment as well.”

The ringgit slid 1.5% over the week to 3.7218 a dollar, data compiled by Bloomberg show. The Philippine peso retreated 0.6% and the Indonesian rupiah and Taiwan dollar each dropped 0.5%.

Foreign funds sold a net $1.2 billion worth of stocks through Thursday in Taiwan, Thailand, Indonesia and the Philippines, exchange data show.

Greece became the first country since the 1980s to defer a payment to the International Monetary Fund, amid a lack of progress in talks with creditors who continue to press cash-strapped Athens for more austerity measures.

“The risk-aversion with regards to Greece is hovering,” said Leong Sook Mei, Singapore-based Southeast Asia head of global markets research at Bank of Tokyo-Mitsubishi UFJ. “There are still a lot of dollar bids on the whole.”

The ringgit fell for a third week as crude prices slumped 5.8% from May 29. Malaysia derives 22% of state revenue from energyrelated sources.

“Malaysia is the most exposed to lower commodity prices, in particular oil,” said Sue Trinh, senior currency strategist at Royal Bank of Canada in Hong Kong.

Meanwhile, a report on Friday showing US employers added a healthy 280,000 jobs in May further supported the case for the Federal Reserve to move ahead with interest-rate increases, which would strengthen the dollar at the expense of Asian currencies.

Elsewhere in Asia, the South Korean won fell 0.3% last week, the Thai baht declined 0.1% and the yuan dropped 0.07%. The Indian rupee weakened 0.1% and the Vietnamese dong was little changed.