Asian Currencies: Peso, Ringgit, Yuan Decline as Rupiah Gains

By David Yong and Lilian Karunungan

Aug. 12 (Bloomberg) -- The Philippine peso fell to its lowest in almost three weeks, leading losses in Asian currencies, on speculation overseas funds are selling local assets to convert their holdings into the dollar.

The peso was the region's worst performer as foreigners reduced holdings of local stocks for a 12th day. Malaysia's ringgit headed for the longest losing streak since a peg to the dollar ended in July 2005 on speculation economic growth will slow. China's yuan halted a two-day gain after a government report showed inflation cooled to the slowest in 10 months.

The peso ``is basically driven mostly by offshore players, probably buying up the dollar,'' said Rafael Algarra, a treasurer at Security Bank Corp. in Manila. ``I would think this is mostly trading related, not demand related.''

The currency declined 0.6 percent to 44.575 per U.S. dollar as of 11:30 a.m. in Manila, according to Tullett Prebon Plc. The ringgit slumped for an eighth day, losing 0.5 percent to reach the year's low of 3.3322.

Foreign investors were net sellers of Philippine stocks in the past 12 trading days, according to stock exchange data, the longest stretch since Jan. 29. The Dollar Index traded on ICE Futures in New York touched the highest since February on speculation a decline in commodity prices will support U.S. economic growth and demand for dollars.

Seven of the 10 most-active Asian currencies outside of Japan weakened today. Indonesia's rupiah rose on speculation its central bank bought the currency to help stem inflation.

Slower Growth

Malaysia's ringgit extended losses on speculation the economy will cool as exports slow and faster inflation curbs consumer spending. Southeast Asia's third-largest economy expanded at a ``moderate'' pace in the second quarter, Prime Minister Abdullah Ahmad Badawi said yesterday.

``Recent data signal more downside risk to the currency,'' said Joanna Tan, a Singapore-based economist at Forecast Pte. ``Malaysian exports are susceptible to headwinds and won't escape the erosion in global demand.''

Bank Negara Malaysia will report second-quarter gross domestic product on Aug. 29 and the government will present its 2009 budget on the same day. The economy grew 7.1 percent from a year earlier in the first quarter, after expanding 7.3 percent in the final three months of 2007.

Cooling Inflation

The yuan dropped 0.1 percent to 6.8618 in Shanghai, according to the China Foreign Exchange Trade System, after a government report today showed China's inflation eased to 6.3 percent in July, the slowest in 10 months.

The currency has fallen 0.7 percent since July 25 when the Politburo, the Communist Party's top decision-making body, said sustaining growth was as important as controlling inflation. President Hu Jintao cautioned this month against overestimating the benefits to the economy from the Beijing Olympics.

``As inflationary pressure eases, policy makers are more concerned about the effect of yuan appreciation on exports,'' said Wang Qing, chief China economist at Morgan Stanley in Hong Kong. ``The government will slow the appreciation pace, and even let the yuan depreciate for one or two months.''

Indonesia's rupiah gained, ending a three-day drop, on speculation the central bank wants a stronger currency to slow inflation from a 22-month high. Consumer confidence rose in July for the first time since November, a central bank report showed.

Deputy Governor Hartadi Sarwono on Aug. 8 said Bank Indonesia will prevent the rupiah from depreciating too fast to slow inflation.

Intervention

``Much of this boost was created by intervention by the central bank,'' said Gundy Cahyadi, an economist at IDEAglobal on Singapore. ``They want the rupiah to strengthen. They are still pretty much concerned about inflation.''

The currency rose 0.1 percent to 9,183 per dollar in Jakarta, from 9,196 late yesterday, according to data compiled by Bloomberg. Taiwan's dollar was little changed at 31.164, a level near a five-month low.

Taiwan's central bank yesterday sold at least $300 million, the Taipei-based Economic Daily News reported, citing traders it didn't identify. The bank asked local banks to avoid speculating on the local currency, the newspaper said.

``I don't think we've hit the bottom,'' said Gerrard Katz, head of currency trading in Hong Kong at Standard Chartered Plc. The local dollar ``may consolidate for a while before dollar- Taiwan moves higher again.''

Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.

Elsewhere, South Korea's won dropped 0.1 percent to 1,033.25, the Singapore dollar declined 0.3 percent to S$1.4111 and the Vietnamese dong ended a seven-day winning run, losing 0.4 percent to 16,520.

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