Slide in Yuan Roils Asian Currencies; Rupee, Rupiah, Ringgit at Multi-Year Low

Nichole Harper
12 Aug, 2015
New York City

World currency markets were roiled after China let yuan slide for the second day in a row. Currencies in India, Australia, New Zealand, Indonesia and Malaysia hit multi-year lows. Indexes on Wall Street swung wildly but managed to trim losses of the day at close.

[R]5:40 PM New York City, New York – World currency markets were roiled after China let yuan slide for the second day in a row. Currencies in India, Australia, New Zealand, Indonesia and Malaysia hit multi-year lows. Indexes on Wall Street swung wildly but managed to trim losses of the day at close.[/R]

Market indexes on Wall Street wildly swung after China let its currency slide further for the second day in a row.

Yuan declined by 1.5% on the second day after losing 2% in the previous session and traders speculated that the currency may fall as much as 10% as policy makers look for ways to support exporters.

In Shanghai, yuan traded as low as 6.45 against a dollar, lowest since August 2011, as the People’s Bank of China widened the trading band for the currency.

In international trading, yuan dropped to as low as 6.588 against a dollar and three months futures traded near 7 to the U.S. dollar.

The devaluation by China hit hard currencies across Asia. Rupee in India dropped to a new yearly low and rupiah in Indonesia declined to a 17-year low and ringgit declined to a two-decade low. Dollar in Australia and in New Zealand dropped to a six-year low.

On Wall Street, Tollbooth Strategy Index decreased 135.57 or 1.3% to 10,655.11.

S&P 500 index slipped 25.64 or 1.1% to 2,060.76 and the Nasdaq Composite Index decreased 65.18 or 1.3% to 4,971.67.

Crude oil in New York edged down 0.03 cents to $43.05 a barrel and gold jumped $16.70 to $1,124.40 an ounce.

U.S. Movers

Alibaba Group Holding Ltd ((BABA)) declined 6.4% or $4.93 to $72.39 after the China-focused online and mobile marketplaces reported total revenues in the first-quarter ending in June jumped 28% to $3.27 billion from a year ago period.

Net income in the quarter climbed 148% to $4.97 billion and diluted earnings per share increased 129% to $1.92 compared to the same period a year ago.

Revenue growth slowed in the quarter as more traffic originated on the mobile devices, which lowers advertising yields. Gross merchandise volume jumped 34% to 673 billion yuan, slowest increase in three years.

Alibaba also announced its plan to repurchase $4 billion of its shares over the next two years to stem the dilution from the stock-based compensation program.

General Electric Company ((GE)) slid 19 cents to $25.51 after the diversified conglomerate agreed to sell its healthcare financial services business to Capital One Financial Corporation for $8.50 billion.

Separately, GE also agreed to divest healthcare financial services real estate equity investments to another unnamed buyer for about $600 million.

European Markets

UK unemployment rate for the three months to June increased to 5.6% from 5.5% in the three months to March but dropped from 6.3% in a year ago period, the Office of the National Statistics said.

Industrial output in June fell 0.4% in the euro area and 0.2% in the wider region of EU28 from May. In May, production slid 0.2% in euro area and 0.1% in the wider region of EU28, the Statistical Office of the European Communities reported today.

In London trading, FTSE 100 index dropped 121.99 or 1.8% to 6,542.42 and in Frankfurt the DAX index declined 366.36 or 3.2% to 10,932.53.

In Paris, CAC 40 index plunged 371.98 or 3.4% to 4,926.50.

E.ON SE slid 0.09% to €11.69 after the Germany-based utility provider reported revenues in the first-half ending in June jumped 5% to €57.30 billion from €54.78 billion in a year ago period.

Net profit in the period soared 40.1%from a year ago to €1.15 billion compared to €821 million and diluted earnings per share jumped to €0.59 from €0.43.

E.ON forecasted operating profit for the year between €7 billion and €7.6 billion.

Henkel AG & Co KGaA plunged 7.8% to €100.50 after the Germany-based detergent maker said revenues in the first-half ending in June soared 13.1% to €9.13 billion from €8.07 billion in a year ago period.

Net profit in the period climbed 12.3% from a year ago to €1.01 billion compared to €902 million and diluted earnings per share increased to €2.28 from €2.05.

Pearson Plc slid 0.7% to 1,165 pence after the U.K.-based education and media group agreed to sell its 50% stake in the Economist Group, the publisher of The Economist to Exor S.p.A for £469 million or $730 million in cash to focus on education assets.

The Italy-based Agnelli family is the largest investor in Exor.

The transaction is expected to close in the fourth-quarter of this year.

Asian Markets

Nikkei average dropped for the second day in Asia-wide correction following the 2% yuan devaluation. Industrial production in Japan rose 1.1% in June and shipment increased 0.6% form the last month.

Online real estate information provider Next Co. said quarterly revenues soared 42%.

Nikkei average in Tokyo closed fell for the second day after the yuan devaluation dragged Asian markets.

The seasonally adjusted industrial production in June jumped 1.1% compared to 2.1% decrease in May, the Ministry of Economy, Trade and Industry said.

Shipments in June increased 0.6% from the last month.

For the year, industrial production in June climbed 2.3% followed by 3.9% decline in the previous month.

The seasonally adjusted capacity utilization in the month rose 0.7% following 3% drop in the previous month.

The Nikkei 225 Stock Average dropped 327.98 or 1.6% to 20,392.77 and the broader Topix index slumped 21.85 or 1.3% to 1,665.75.

The yen eased to 124.93 against a dollar.

Dai-ichi Life Insurance Co Ltd slumped 2.6% to 2,488.50 yen after the life insurance company agreed to acquire the U.S.-based Symetra Financial Corporation for about $32 a share in cash plus a special dividend of 50 cents per share or $3.8 billion.

Market indexes in Mumbai plunged for the second day in a row following an Asia-wide correction after China devalued yuan by 2%.

The rupee continued its downward spiral against the US dollar amid dollar demand from importers as traders adjusted to a new range for the Indian currency against the dollar following Tuesday’s devaluation of the yuan by the People’s Bank of China.

The rupee was trading at 64.82 per dollar, down 0.95% from its previous close of 63.20, a level last seen in September 2013 when the rupee was recovering from the record low of 68.82.

Rupee weakened 57 paisa to 64.76 against one U.S. dollar.

The Sensex Index declined 353.83 or 1.3% to close at 27,512.26. The CNX Nifty slipped 112.90 or 1.3% to 8,349.45.

Industrial production index in India jumped to 3.8% in June from a year ago month. Manufacturing index rose 4.6% while mining production slid 0.3% and electricity output rose 1.3%, the Central Statistical Office said.

Separately, the department reported annual rate of inflation measured in consumer price index in July decreased to 3.78% from 5.40% in June but dropped from 7.39% in a year ago month, on a revised base year.

Sun Pharma, the largest generic drug maker in India said quarterly profit plunged 60% but another generic drug maker Cadila Healthcare said profit surged 47%.