Asian Currencies: Peso, Baht Lead Drop as Regional Stocks Slump

By David Yong and Lilian Karunungan

Aug. 19 (Bloomberg) -- The Philippine peso declined along with eight of the 10 most-active Asian currencies as a slump in global stocks eroded investor appetite for emerging-market assets.

The peso dropped to the lowest in a month as foreigners sold Philippine shares for a 16th day on Aug. 15. The MSCI Asia Pacific Index of equities fell to the lowest in two years after Barron's reported the U.S. expects mortgage companies Fannie Mae and Freddie Mac will fail to raise the capital they need to offset credit losses. Thailand's baht traded at the lowest in eight months.

``Markets are worried about credit concerns,'' said Catherine Tan, head of foreign exchange at Thomson Financial Asia in Singapore. ``Stock markets are not looking good. That's weighing on the peso.''

The peso dropped 0.3 percent to 45.435 per dollar as of 11:28 a.m. in Manila, compared with 45.310 on Aug. 15, according to Tullett Prebon Plc. Markets were shut for a public holiday yesterday. The baht weakened 0.3 percent to 33.94 and Taiwan's dollar fell 0.2 percent to NT$31.353.

The MSCI Asia Pacific Index lost 1.6 percent to the lowest since July 2006. The Standard & Poor's 500 Index yesterday fell 1.5 percent, with both Fannie Mae and Freddie Mac sliding to their lowest levels in more than 17 years.

The U.S. plans to recapitalize Fannie and Freddie with taxpayer money should their capital raising fail, Barron's reported yesterday, citing a person in the administration of George W. Bush that it didn't identify. The companies own or guarantee 42 percent of the $12 trillion in U.S. home loans.

`Credit Woes'

South Korea's won dropped for an eighth day to a six-week low of 1,047.90 as fund managers outside the nation sold more local shares than they bought for the first time in three days, according to stock exchange data.

``Market players are strongly bidding for the dollar as global credit woes appear to be deepening,'' said Kim Yule, a currency dealer with BNP Paribas in Seoul.

Finance companies have reported $503 billion in write downs and credit-market losses linked to the U.S. housing market slump since the start of 2007, according to data compiled by Bloomberg.

U.S. housing starts fell to an annual rate of 960,000 in July, the fewest in 17 years, a Bloomberg News survey of economists showed before the Commerce Department reports the figure today.

Thailand's baht traded at the lowest in eight months before the nation's Election Commission decides today whether to pursue a request in the Constitutional Court to disband the ruling People Power Party led by Prime Minister Samak Sundavarej.

``We have the whole motion ongoing against the People Power Party,'' said Vishnu Varathan, an economist at Forecast Singapore Pte. ``The situation in Thailand has gotten much worse. It isn't looking very Thai baht-friendly.''

Political Risks

Malaysia's ringgit traded at 3.3383 per dollar, after reaching the year's low of 3.3515 yesterday, as the Kuala Lumpur Composite Index of stocks fell by the most in two weeks to the lowest since December 2006. HSBC Holdings Plc, Europe's biggest bank, yesterday cut its ringgit forecasts for 2008 and 2009.

Lawmakers from the ruling National Front coalition may announce defections as early as Aug. 27, opposition leader Anwar Ibrahim said on Aug. 8. Anwar is seeking a return to parliament in an Aug. 26 by-election in northern Penang state.

``Credit and political risks are still out there and we are seeing demand coming back for the dollar,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur.

China's yuan climbed for the first time in four days on speculation China will act to strengthen the currency to curb the trade surplus. The currency's 6.2 percent advance this year is twice as fast as in the same period last year.

``A stronger currency is still needed to address the external imbalance and excessive foreign liquidity inflows,'' said Yen Ping Ho, a currency strategist at JPMorgan Chase & Co. in Singapore. ``The yuan has continued to appreciate on a trade- weighted basis, and at a faster pace recently.''

Elsewhere, Indonesia's rupiah fell 0.1 percent to 9,194 and Vietnam's dong traded at 16,682 from 16,685 per dollar yesterday. The Singapore dollar was little changed at S$1.4143.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.