Commodity Price Rise Asian Currency Drop

Higher commodity prices will slow the global economic recovery, India?s rupee and South Korea?s won led declines in Asian currencies this week on concern, hurting exports and curbing demand for emerging-market assets. The Singapore dollar climbed to a record after a revaluation.

Overseas investors sold $591 million more South Korean and Taiwanese shares that they bought in the week, exchange data show. The International Monetary Fund cut its 2011 growth forecasts for the U.S. and Japan on April 11, citing ?key downside risks? tied to a 20 percent gain in crude prices this year. The yuan hit a 17-year high yesterday as China reported bigger-than-expected increases in gross domestic product and consumer prices.

?People are taking risk off the table as there are still uncertainties in Japan and because of strong commodity prices,? said Roland Randall, a senior currency strategist at TD Securities Inc. in Singapore.

The rupee dropped 0.6 percent this week to 44.333 per dollar, according to data compiled by Bloomberg. The won weakened 0.6 percent to 1,089.80 and the Philippine peso slid 0.6 percent to 43.24. The Singapore dollar rose 1 percent to S$1.2452 after the city-state?s central bank said on April 14 that it would allow faster gains to combat inflation.
Growth Forecast

The IMF lowered its forecast for economic growth in the U.S. this year to 2.8 percent from its January projection of 3 percent, while its Japan estimate was cut to 1.4 percent from 1.6 percent. Japan?s government cut its assessment of the economy for the first time in six months on April 13, after a record earthquake and ensuing tsunami last month killed more than 12,000 and led to the worst nuclear crisis since Chernobyl.

China?s economy expanded 9.7 percent from a year earlier in the first quarter and consumer prices rose 5.4 percent in March, the statistics bureau said yesterday. Economists expected growth of 9.4 percent and a 5.2 percent inflation rate, based on the median estimates of economists surveyed by Bloomberg.

The yuan gained 0.05 percent this week to 6.5325 per dollar, according to the China Foreign Exchange Trade System. It touched 6.5290 yesterday, the strongest level since the country unified official and market exchange rates at the end of 1993, on speculation policy makers will allow gains to tame inflation.

?The inflation problem is getting more complicated because it?s not only about domestic costs but rising import bills as well,? said Kenix Lai, a foreign-exchange analyst at Sun Hung Kai Securities Ltd. in Hong Kong. ?China needs a package of tools, including currency appreciation, to deal with the price pressure.?
Intervention Prospects

The won retreated from a 31-month high this week and Thailand?s baht fell from its strongest level of the year on concern policy makers would intervene to combat appreciation.

The baht declined 0.3 percent in the first two days of the week to 30.14 per dollar. Financial markets in Thailand were closed for the last three days of the week for public holidays.

Bank of Korea left interest rates unchanged on April 12 and Governor Kim Choong Soo said policy makers were looking ?seriously? at the volatility of the currency. Deputy Governor Atchana Waiquamdee said April 11 that the Bank of Thailand ?stepped in? to ease excessive volatility in the currency. Taiwan?s central bank sold the local dollar in the last minute of trading that day, according to two traders who declined to be identified because the authorities don?t disclose such details.

Elsewhere, Taiwan?s dollar fell 0.2 percent for the week to NT$29.050, according to Taipei Forex Inc. Indonesia?s rupiah dropped 0.2 percent to 8,663 and Malaysia?s ringgit slipped 0.2 percent to 3.0235.