Asian Currencies: Philippine Peso, Malaysian Ringgit Lead Drop

By Lilian Karunungan and Karl Lester M. Yap

July 22 (Bloomberg) -- The Philippine peso fell, leading losses in Asian currencies, on speculation rising oil prices will widen the nation's trade deficit.

The peso dropped a second day as oil snapped a four-day decline yesterday in New York to trade above $130 a barrel. The Southeast Asian nation imports almost all of its fuel requirements. Malaysia's ringgit fell on concern a global economic slump will curb investor demand for emerging-market assets. Seven of Asia's 10 most-traded currencies outside Japan weakened today.

``Oil has come back above $130 a barrel and this continues to put pressure on the peso,'' said Rafael Algarra, a treasurer at Security Bank Corp. in Manila. Higher oil prices mean higher demand for dollars to buy the commodity and a wider trade deficit, he said.

The peso fell as much as 0.5 percent to 44.737 against the dollar before trading at 44.61 as of 4 p.m. in Manila, according to Tullett Prebon Plc. The ringgit declined 0.1 percent to 3.2390 per dollar in Kuala Lumpur, according to data compiled by Bloomberg.

The Philippines' trade deficit widened to $531 million in April from $219 million a year earlier, according to government data. The shortfall for the first four months of the year was $2.6 billion compared with $1.8 billion a year earlier.

The peso pared losses after Cyd N. Tuaño-Amador, the central bank's managing director, said further interest-rate increases are ``on the table'' because the impact from soaring oil and rice prices may persist.

Rate Outlook

The ringgit has slipped almost 1 percent since reaching a six-week high on July 15 as Second Finance Minister Nor Mohamed Yakcop said yesterday inflation in June may have reached 7 percent, the fastest in 26 years. The report is due tomorrow.

Bank Negara Malaysia will raise its benchmark interest rate for the first time since April 2006 when policy makers meet on July 25, according to a Bloomberg News survey. In a May survey, economists were unanimous in forecasting a no-change in policy rate for July meeting.

Bank Negara ``might just do a small hike but that's not going to help the ringgit much because there isn't any huge appetite in the market for taking risks now,'' said Thio Chin Loo, a currency strategist at BNP Paribas SA in Singapore.

The currency may trade between 3.20 and 3.30 in the weeks ahead, Thio said.

Inflation Concern

Indonesia's rupiah declined the most this month to a two- week low on speculation overseas investors will sell bonds before the government reports inflation data next week.

Finance Minister Sri Mulyani Indrawati said last week inflation may average 11.4 percent this year. Consumer-price gains accelerated to 11 percent in June, the most in 21 months, after the government reduced fuel subsidies in May. The central bank raised its benchmark interest rate for the third month in a row on July 3 to 8.75 percent to tame inflation.

``The worry is still inflation,'' said Muhammad Fauzi Halim, a currency trader at PT Bank Resona Perdania in Jakarta. ``In the short term, foreign players would want to wait for the Bank Indonesia decision. The rupiah will be weaker.''

The rupiah slipped as much as 0.3 percent to 9,176 a dollar before trading at 9,153 in Jakarta, versus 9,152 yesterday, according to data compiled by Bloomberg. The currency may trade between 9,170 and 9,200 today, Fauzi said.

Bank Indonesia next meets on Aug. 5 to decide on interest rates after the government reports July inflation on Aug. 1.

Intervention Speculation

South Korea's won halted a six-day slide after Vice Finance Minister Kim Dong Soo said the government will take ``reasonable'' steps to help stabilize consumer prices, sparking speculation authorities will bolster the currency by intervention.

Inflation that was at a decade high of 5.5 percent in June remains ``a big concern,'' Kim said. Central banks intervene in currency markets by arranging sales or purchase of foreign exchange.

The won traded at 1,017.65 a dollar versus 1,018 yesterday, according to Seoul Money Brokerages Ltd.

Elsewhere, the Singapore dollar fell 0.1 percent to S$1.3517 against the U.S. currency. The Thai baht was little changed at 33.35 while Taiwan's dollar slipped 0.1 percent to NT$30.381. Vietnam's dong was unchanged at 16,640.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Karl Lester M. Yap in Manila at kyap5@bloomberg.net.