As financiers worry that borrowing costs in Europe will worsen the debt crisis, South Korea’s won and Indonesia’s rupiah set a falling trend in Asian currencies.
The won declined after bonds from France, Belgium, Spain and Austria climbed to the highest premiums since the euro was established, and the rupiah fell to its lowest since September.
“We think Asian currencies will depreciate by the end of the year because of the euro-zone fiscal crisis,” explained Dariusz Kowalczyk of Credit Agricole CIB. “Risk aversion will dominate trading in the near term.”
Italy’s bond yields increased more than 7%, propmpting Greece, Ireland and Portugal to call for bailouts. Meanwhile, Spain and Belgium’s debt auctions were not as successful as planned.
“Investors are buying the dollar amid all the uncertainties we are seeing in the global environment,” said Roy Paul of Federal Bank. “The rupee’s slide may induce intervention from the central bank.”