Asian Currencies: Ringgit Falls on Sodomy Charge Against Anwar

By Aaron Pan and David Yong

Aug. 7 (Bloomberg) -- Asian currencies fell, with Malaysia's ringgit weakening to the lowest level in more than six months on concern that investors will avoid local assets as political tensions escalate.

The currency dropped for a fifth day as opposition leader Anwar Ibrahim, charged with having homosexual relations, appeared in court. He has denied the accusation, saying it's a ploy to derail his political comeback. Eight of the 10-most active Asian currencies outside of Japan fell today, while the Korean won was little changed.

``The main thing investors worry about is political uncertainty and the market could react negatively,'' said Nikhilesh Bhattacharyya, an economist at Moody's Economy.com in Sydney. ``It doesn't look pretty, looking from outside.''

The ringgit fell 0.2 percent to 3.2843 against the dollar as of 11:38 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It reached 3.2860, the lowest since Jan. 24.

Anwar is preparing to contest a parliamentary by-election scheduled for Aug. 26. He pleaded not guilty and a trial was set for Sept. 10. The Kuala Lumpur Composite Index of shares fell 1.2 percent and bonds declined.

Prime Minister Abdullah Ahmad Badawi faced calls to step down after the ruling National Front coalition lost its two- thirds majority in parliament in a March election. The ringgit plunged the most in nine months and stocks had the biggest loss in a decade after the poll.

Singapore's dollar lost 0.3 percent to S$1.3833 against the U.S. currency, the Philippine peso dropped 0.1 percent to 43.885 and Thailand's baht slipped 0.1 percent to 33.65. Vietnam's dong was little changed at 16,595 versus 16,600 yesterday.

Taiwan Exports

Taiwan's dollar fell for an eighth day, the longest losing streak in 15 months, before a government report at 4 p.m. today that economists said will show export growth slowed.

The currency reached the lowest in almost three months. Exports rose 17.1 percent in July from a year earlier, compared with a 21.3 percent gain the previous month, according to a Bloomberg News survey. Exports make up 50 percent of gross domestic product.

``The immediate risk for the economy is the slowdown in exports,'' said Irene Cheung, strategist at ABN Amro Bank NV in Singapore. ``The risk is still toward a higher dollar-Taiwan.''

Taiwan's dollar fell 0.4 percent to NT$30.85 against the U.S. currency, according to Taipei Forex Inc. It earlier fell to NT$30.858, the lowest since May 16.

South Korea's won was little changed after the central bank raised the benchmark interest rate to the highest in almost eight years as it seeks to curb inflation.

`Inflation-Fighting'

The currency advanced 3.2 percent this quarter, the best performer among the 10 most-active regional currencies outside of Japan, on speculation the nation wants the won to strengthen to lower the cost of imports. Bank of Korea Governor Lee Seong Tae and his six colleagues increased the seven-day repurchase rate to 5.25 percent from 5 percent.

``The move is taken to mean that they've made it very clear to focus policy on inflation-fighting,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``The won will come under mild upward pressure in light of easing price pressure.''

The currency was at 1,016.10 per the dollar versus 1,015.90 yesterday, according to Seoul Money Brokerage Services Ltd.

Global funds bought more Korean shares than they sold for the first time in five days.

Failure to Break

Indonesia's rupiah fell, snapping a three-day advance, after its failure to strengthen beyond 9,000 to the dollar encouraged traders to buy back the U.S. currency.

The rupiah has failed four times to rise above 9,000 per dollar in the past year, according to data compiled by Bloomberg. The currency climbed to 9,056 yesterday, its highest level in five months. The rupiah will trade at an average of 9,250 this year, the government forecast in its 2008 budget released to lawmakers on July 15.

``The rupiah's weakness is due to profit-taking as it neared the crucial dollar support level of 9,000,'' said Thomas Harr, a senior currency strategist at Standard Chartered Plc in Singapore. ``Historically, the central bank had this unofficial range of 9,000 to 9,500. Despite what it says about wanting a stronger currency to curb inflation, the market is very wary that they may not allow it to break the 9,000 level.''

The rupiah weakened 0.4 percent to 9,106 per dollar, according to Bloomberg data.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.