Asian Currencies: Singapore Dollar, Ringgit Slump on Exports

By David Yong and Patricia Lui

Aug. 11 (Bloomberg) -- Asian currencies declined, with Singapore's dollar slumping to a five-month low after a government report showed the economy expanded at the slowest pace in five years.

The local dollar extended last week's slide, which was the most in a decade, after the government on Aug. 8 cut its 2008 growth forecast to ``prepare for a bumpy year ahead.'' The island-state said today that exports will drop as much as 4 percent this year, versus an earlier estimate for growth. South Korea's won dropped 0.4 percent and Malaysia's ringgit posted its biggest loss in more than two months.

``The comments were dovish and the cut in the exports growth forecast is significant for the Singapore dollar,'' said Thomas Harr, a senior currency strategist at Standard Chartered Plc in Singapore.

Singapore's dollar fell as much as 0.8 percent to S$1.4102 versus the U.S. currency, the lowest since Feb. 22, before trading at S$1.4029 as of 4:16 p.m. local time, according to data compiled by Bloomberg. Korea's won fell 0.4 percent to 1,031.80 and the ringgit weakened for seventh day to 3.3165.

Singapore's gross domestic product increased 2.1 percent from a year earlier in the second quarter, following a 6.9 percent expansion in the previous three months, the trade ministry said today.

Exports will fall this year for the first time since 2001, the government said, joining Asian neighbors in signaling a deepening economic slowdown.

Feeling the Impact

``Singapore's economy has so far been partly buffered, because we've been carried along by the vibrancy of the Asian region,'' Prime Minister Lee Hsien Loong said Aug. 8. ``Asian economies are starting to feel the impact of America's problems. We must therefore prepare ourselves for a bumpy year ahead.''

The ringgit headed for its longest losing run since October 2006 after a government report showed industrial production rose at the slowest pace in 10 months in June as export demand waned.

The currency extended last week's 1.2 percent loss, the steepest in almost nine months, after Singapore revised its export and growth outlooks. Singapore this year surpassed the U.S. as Malaysia's biggest overseas market.

``We could be at the start of a slowdown and there is a possible downgrade to the growth projection,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``The ringgit will be weaker'' given the drop in Singapore's currency and economic outlook, he said.

Cutting Forecasts

Malaysia's industrial production rose 2 percent in June from a year earlier, the government said today. Factory output increased 2.5 percent in May and 4.8 percent in April.

Citigroup Inc. on Aug. 8 lowered its end-2008 forecast for the ringgit to 3.33 a dollar, and expects its old target of 3.28 to be achieved by end-2009, citing weaker commodity prices and a sell-off in local bond market amid political turmoil.

South Korea's won fell for a third day as demand for the dollar increased from foreign stock sales and importers seeking to pay bills. Global funds sold more Korean shares than they bought for a second day, the stock exchange said.

The currency pared an earlier slump to 1,037.55 against the dollar after a finance ministry official expressed concern, vowing to take steps to slow the ``rapid'' drop.

``Demand from offshore and onshore players was quite strong all day,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``Actual intervention towards the close helped to temper the won's loss a bit.''

Slowing Demand

Taiwan's dollar weakened 0.2 percent to NT$31.166 to complete a 10-day losing streak, the longest run since December 2001. The island reported its first trade deficit since February 2006 in July as slowing global growth crimped demand for the nation's exports.

``Taiwan is particularly vulnerable to slowing external demand,'' said Callum Henderson, head of currency strategy at Standard Chartered Plc in Singapore. The local dollar ``is under significant pressure lately and is likely to remain so.''

Elsewhere, the Philippines peso traded at 44.32 per dollar versus 44.335 on Aug. 8, and Vietnam's dong advanced 0.5 percent to 16,460. Thailand's baht dropped 0.1 percent to 33.74 while Indonesia's rupiah lost 0.2 percent to 9,185, the lowest level in more than a month.

To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net; Patricia Lui in Singapore at plui4@bloomberg.net.