Asian Currencies: Korean Won, Philippine Peso Decline This Week

By Lilian Karunungan and Judy Chen

Aug. 23 (Bloomberg) -- South Korea's won slumped to a four- year low on speculation intervention won't halt the currency's slide. The Philippine peso fell this week after the government lowered its economic growth forecast.

The won dropped as much as 0.8 percent yesterday to 1,063 against the dollar, the weakest since December 2004, as refiners bought the U.S. currency to import oil and overseas investors sold local stocks. The won had rallied 0.6 percent before the slide on purchases by the central bank, according to Sam Hong, a Seoul-based currency trader at Shinhan Bank, a unit of South Korea's second-biggest financial group.

``The government's action is not strong enough to stop the won's slide,'' said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank in Seoul. ``There have been a lot of purchases of the dollar from the local energy companies.''

The won slid 0.7 percent to 1,062.5 per dollar yesterday in Seoul, after touching a high of 1,048, according to Seoul Money Brokerage Services Ltd. It's dropped 4.7 percent this month, the biggest decline among Asia's 10 most-active currencies excluding the yen. The peso fell 0.2 percent to 45.65 per dollar in Manila yesterday, according to Bankers Association of the Philippines, extending this week's losses to 0.3 percent.

Korea's government continues to ``closely'' monitor the currency for ``drastic'' fluctuations, Vice Finance Minister Kim Dong Soo said on Aug. 20.

The nation's foreign-currency reserves dropped $10.58 billion in July to $247.52 billion, a fourth straight monthly decline, as policy makers tried to halt a slide in the won. Central banks intervene in currency markets by selling or buying foreign exchange.

Stock Sales

The won slid 2.2 percent this week, declining for a fourth consecutive time, the longest stretch in a year. Demand for the currency slumped as overseas investors sold 1,226 billion won ($1.15 billion) more shares than they bought, trimming their holdings on all but one of the five trading days, according to stock exchange data.

The Kospi index fell every day this week, sliding 4.8 percent to close at 1,496.91. That's the first time it's been below 1,500 since April 2007.

The peso fell for a fourth week and reached the lowest level in more than a month on concern that demand for the nation's exports from its biggest market in the U.S. will decrease.

Rate Meeting

Slowing economies are ``a global concern of central banks,'' said Roland Avante, treasurer at Chinatrust (Philippines) Commercial Bank in Manila. ``There's a need for currencies to weaken against the dollar. We're still very much reliant on the U.S., they're still one of our major trading partners.''

Philippine central bank Governor Amando Tetangco said yesterday that foreign-exchange inflows will increase in the fourth quarter, boosting the peso. The currency is weaker because ``we are in import season,'' he said in an e-mail. ``There's demand for dollars.''

Economic Planning Undersecretary Augusto Santos this week said gross domestic product would expand 5.5 percent to 6.4 percent this year, instead of a previously forecast 5.7 percent to 6.6 percent. The U.S. accounts for 16 percent of overseas sales.

Six of the seven economists surveyed by Bloomberg News predict the Philippine central bank will increase borrowing costs next week by a quarter-percentage point to 6 percent. One economist forecast a half-percentage-point increase.

Rupiah Gains

The Indonesian rupiah snapped a two-week decline on speculation overseas investors are buying the nation's assets as stocks rise and the government issues Islamic bonds.

The currency completed its best week in more than a month on speculation the central bank is seeking a stronger currency to help temper inflation. Foreign investors bought more Indonesian stocks than they sold in two of the three trading days until Aug. 21. The government closed this week an offering of 5 trillion rupiah ($546.4 million) of seven- and 10-year sukuk Islamic notes.

``Funds overall are really positive on the rupiah,'' said Catherine Tan, head of foreign exchange at Thomson Financial Asia in Singapore. ``The central bank has been very pro-active in hiking interest rates to counter inflation. There's also been quite a lot of inflows into the sukuk.''

The currency rose 0.3 percent to 9,140 yesterday in Jakarta, according to data compiled by Bloomberg. The rupiah, which gained 0.5 percent this week, will strengthen to 9,000 by the end of the year, Tan forecast.

Singapore Dollar Strength

The central bank raised its benchmark interest rate four times this year to 9 percent after inflation accelerated to 11.9 percent in July, the most in 22 months.

Singapore's dollar had its best week in two months as the U.S. currency weakened against the euro and the yen, which are part of the trade-weighted basket managed by the Southeast Asian nation's central bank.

The local dollar was the best performer yesterday among Asia's 10 most-traded currencies outside Japan, rising to a one- week high. The U.S. currency declined this week on concern that widening credit-market losses and a deepening housing recession will prevent the Federal Reserve from raising interest rates.

``The Singapore dollar's strength is from a pullback in the broader U.S. dollar environment,'' said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore.

The Singapore dollar rose 0.6 percent this week, the most since the five days through June 20, to S$1.4081 against the U.S. dollar. It touched S$1.4028, the strongest level since Aug. 14.

Elsewhere, the Malaysian ringgit advanced 0.2 percent to 3.3400 a dollar from 3.3480 last week. The Thai baht fell 0.3 percent to 33.93. Taiwan's dollar declined 0.1 percent to NT$31.370 and Vietnam's dong was at 16,595 per dollar.

To contact the reporters on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net; Judy Chen in Shanghai at xchen45@bloomberg.net.