Asian Currencies: Philippine Peso Falls on Oil; Korea Won Rises

By David Yong and Lilian Karunungan

Aug. 14 (Bloomberg) -- The Philippine peso led declines in Asian currencies on concern a rally in oil prices will push up import costs and worsen the nation's balance of payments.

The peso approached the lowest in four weeks against the dollar after crude oil jumped more than 3 percent in the past two days. The Philippines imports almost all of its oil requirements. Malaysia's ringgit fell on concern the global economic slowdown will spread after the Bank of England lowered its growth forecast and subprime-mortgage market losses widened.

The decline in the peso is ``exacerbated by oil prices bouncing back,'' said Vishnu Varathan, a regional economist at Forecast Singapore Pte. ``We also see overall there's a bit of risk aversion with renewed credit concerns.''

The peso declined 0.4 percent to 44.910 per dollar as of 11:49 a.m. in Manila, according to Tullett Prebon Plc, the biggest loss of the 10 most-traded currencies in Asia outside Japan. The ringgit fell 0.3 percent to 3.3325 and Singapore's dollar weakened 0.3 percent to S$1.4099.

The surplus in the Philippines' balance of payments this year may be less than the $2.5 billion the central bank estimated earlier due to stock sales, the Philippine Star newspaper reported on Aug. 4. Overseas investors sold more local shares than they bought on each of the past 14 days, the longest stretch since November, according to stock exchange data.

U.S. stocks fell yesterday after Merrill Lynch & Co downgraded shares of its biggest U.S. rivals, saying the contagion from the subprime-mortgage market is ``far from over'' even after more than $500 billion of writedowns and credit market losses since the beginning of last year.

Malaysian Ringgit

Malaysia's ringgit fell after the Bank of England cut its forecast for U.K. economic growth as unemployment rose the most in almost 16 years. Sales at U.S. retailers dropped in July for the first time in five months. The U.S. is Malaysia's second- largest export market.

``The market is feeling the impact from negative events in the U.K and U.S.,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. ``We can see that local banks are selling the ringgit again.''

The British pound slumped to a 22-month low yesterday after the BOE said the U.K. economy will only grow 0.1 percent in the first quarter of 2009, compared with a previous forecast of 1 percent. The U.K. is its third-largest market in Europe, according to trade ministry data.

Taiwan Dollar

Taiwan's dollar fell to near a five-month low on speculation a slowdown in global growth will hurt the island's exports and widen its trade deficit. Taiwan last month posted its first trade shortfall since February 2006 after exports grew less than forecast.

``The Taiwan dollar is going to be on a moderate depreciating trend because of the export slowdown,'' said Tomo Kinoshita, chief economist for Asia outside Japan at Nomura Holdings Inc. in Hong Kong. ``The Japanese economy contracted, the European economy is slowing, and we assume the U.S. economy is going to enter a recession in the fourth quarter.''

The Taiwan dollar dropped 0.3 percent to NT$31.24 against the U.S. currency, according to Taipei Forex Inc.

South Korea's won rose, ending a five-day loss, on speculation the central bank will buy the currency to help combat inflation. Consumer prices rose 5.9 percent in July, the most since November 1998, the government said Aug. 1.

The won advanced 0.1 percent to 1,038.55 per dollar. The currency this week approached the 1,040 level against the dollar for the first time since July 7, a threshold that may prompt the Bank of Korea to defend its currency, said Lee Yoon Jin, a currency dealer at state-run Korea Development Bank.

`High Alert'

``Traders are on high alert against any intervention,'' Seoul-based Lee said. ``Demand for the dollar is still strong from importers and foreign stock sales.''

Policy makers issued statements this week saying they would take action to curb ``undesirable'' one-sided moves in the won and limit the cost of imports. Central banks intervene in currency markets by arranging sales or purchases of foreign exchange.

Elsewhere, China's yuan dropped 0.1 percent to 6.8602 per dollar and the Indonesian rupiah was little changed at 9,188. Thailand's baht declined 0.1 percent to 33.71 and Vietnam's dong rose 0.4 percent to 16,567.50.

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