Asian currencies weaken as Europe crisis damps demand
Spain backtracks on plan to save its third-biggest bank
Singapore: Asian currencies weakened after Spain backtracked on a plan to save its third-biggest bank, fuelling concern Europe's debt crisis will worsen and damping demand for emerging-market assets.
The Bloomberg-JPMorgan Asia Dollar Index was poised for its worst monthly loss since September as global funds pulled some $7.7 billion from stock markets in South Korea and Taiwan. Spanish 10-year bond yields rose to the highest level since November as the nation abandoned a plan to use government debt instead of cash to bail out Bankia SA.
"Sentiment toward emerging-market assets remains fragile on concerns over the Spanish banking sector," said Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong. "We expect a risk-off environment, with currencies on the defensive and lower rates."
Stimulus measures
The Philippine peso weakened 0.6 per cent to 43.49 per dollar in Manila, according to Tullett Prebon Plc. South Korea's won fell 0.1 per cent to 1,176.25 and Thailand's baht dropped 0.4 per cent to 31.85. The Asia Dollar Index declined 0.2 per cent, extending its monthly loss to 2.6 per cent.
The MSCI Asia-Pacific Index of stocks fell by the most in a week after a report from China's state-run Xinhua News Agency that policy makers have no plan to introduce stimulus measures on the scale unleashed during the depths of the global credit crisis in 2008. Data due tomorrow may show India's economic growth slowed in the first quarter and Thailand's current- account deficit widened last month.
India's economy probably expanded 6.7 per cent in the first quarter from a year earlier, compared with growth of 8.4 per cent in the preceding three months, according to the median estimate of economists surveyed by Bloomberg. Thailand's current-account deficit widened to $1.98 billion in April from a shortfall of $1.52 billion in March, a separate survey showed.
