Emerging Asian currencies climb but China slips

Emerging Asian currencies crept up today, but the units were set for more losses as China’s weak data compounded concerns about global growth.

The central bank in Indonesia was selling dollars in order to support the rupiah, driving one-month dollar-rupiah non-deliverable forwards (NDFs) down. The Indonesian currency also gained support from lower-than-anticipated inflation data, said dealers. However, the overall outlook for Asia’s emerging currencies remained weak as the debt crisis in the eurozone removed optimism from markets.

The official purchasing managers’ index in China dropped more than anticipated to 50.4 last month, the lowest reading this year and falling from the 13-month high seen in April, in the latest indication that the world’s second-biggest economy’s output is cooling.

Hong Kong-based Credit Agricole CIB senior economist and strategist Dariusz Kowalczyk said that it appears as though the Chinese economy’s slowdown is increasingly pronounced, adding that growth in the second quarter was likely to fall by 7.5 per cent from the same time last year, possible even lower.

He went on to say that they expect local currencies to drop as a result as the Asian region will suffer more from the slowdown in China than it would from the recession in the eurozone in relation to export loss.