Standard Chartered Cuts Asian Currency Forecasts on Slowdown

By Ron Harui

July 3 (Bloomberg) -- Standard Chartered Plc, the U.K. bank that makes more than 90 percent of its profit in emerging markets, cut its forecasts for five Asian currencies saying growth in the region is slowing.

The London-based bank lowered its one-year predictions for the Indian rupee, Pakistan rupee, Philippine peso, South Korean won and Thai baht in a research note sent to clients yesterday. All of the currencies weakened against the U.S. dollar last quarter on concern quicker inflation and a global slowdown will cool their economies.

``This Asian currency correction will continue into the first half of next year,'' Thomas Harr, a senior currency strategist at Standard Chartered in Singapore, said in a telephone interview confirming the contents of yesterday's report. ``A lot of the focus now on current-account deficits and inflation will have a knock-on effect on slowing growth.''

Pakistan's rupee, the worst-performer of Asia's 17 most- traded currencies in the past three months, may weaken to 70 per dollar by the end of June 2009, on a wider current-account deficit and quicker inflation, the report said. That forecast compares with a previous estimate of 69. The Philippine peso may fall to 47 in 12 months, versus an earlier prediction of 43, Standard Chartered said.

The Pakistan currency traded at 69.65 per dollar as of 11:52 a.m. in Karachi, according to data compiled by Bloomberg. The peso was at 45.290 versus the dollar, according to Tullet Prebon Plc.

Rupee, Baht, Won

Standard Chartered also lowered its end of June forecasts for the Indian rupee to 44.50 from 41.80, the Thai baht to 35.50 from 33.50, and the Korean won to 1,030 from 960.

The won was at 1,038.10 per dollar today, according to Seoul Money Brokerage Services Ltd. India's rupee fetched 43.2850 per dollar and the Thai baht traded at 33.37, Bloomberg data show.

Pakistan's rupee has weakened 8.2 percent in the past three months as the nation's economy has slowed and inflation accelerated to the fastest in 30 years. Standard & Poor's and Moody's Investors Service cut the nation's foreign-currency debt ratings in May, citing rising prices, political instability and cooling growth.

The peso is the second-worst performer of the 17 Asian currencies against the dollar in the last three months, losing 8.1 percent, on concern record oil prices will stoke inflation and slowing U.S. economic growth will widen the Asian nation's trade deficit.

``Currencies which are hit now in Asia are the ones where you have a combination of a current-account deficit, inflation getting out of control and a central bank not being hawkish enough,'' Harr said.

Rising food and oil prices pushed the inflation rate in the Philippines to a nine-year high of 9.6 percent in May and spurred the central bank to raise interest rates for the first time since October 2005 last month. The trade deficit widened to $531 million in April from $219 million a year earlier, the National Statistics Office said in Manila on June 25.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.