Asian Currencies Decline, Led by Korean Won, on Risk Aversion

By Aaron Pan

Sept. 24 (Bloomberg) -- Asian currencies declined, led by the South Korean won and Malaysia's ringgit, on speculation the U.S. Congress will delay passage of a $700 billion financial rescue plan, curbing investor appetite for riskier assets.

Eight out of the 10 most-actively traded Asian currencies fell today after Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson yesterday said that failure to pass the bailout would threaten the U.S. economy as lawmakers balked at rubber-stamping the plan.

``The whole market is moving in lockstep with the U.S. and all eyes are on Congress and whether the bailout will be passed,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong. ``The less likely it is, the more risk averse the market will become and emerging-market currencies will suffer.''

The won fell 0.6 percent to 1,154.55 against the dollar as of 12:33 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It has slumped 19 percent this year and reached 1,166.20 per dollar on Sept. 16, the weakest since 2004. Malaysia's ringgit fell 0.3 percent to 3.4218 per dollar.

Korean policy makers may intervene to prevent further weakness, according to Jay Won, a foreign-exchange trader with Korea Exchange Bank in Seoul. Finance Minister Kang Man Soo said today the level of the won should reflect ``economic fundamentals.''

`Traders Are Cautious'

``The local currency market remains unstable given a shortage of dollars,'' Won said. ``Traders are cautious about the intervention that may emerge to check the won's slide.''

Central banks intervene in the currency markets by either selling or buying foreign exchange. South Korea's currency reserves fell to $243 billion by the end of August, from a record $264 billion at the start of the second quarter, as the Bank of Korea tried to halt the won's decline. It fell 14 percent versus the dollar in that time.


Malaysia's government and central bank said Sept. 22 they have no intention of re-pegging the nation's currency amid the global financial turmoil.

Taiwan's dollar weakened after a government report yesterday showed export orders grew at the slowest pace in more than five years.

The local currency ended a three-day advance on concern a global economic slowdown is crimping demand for the island's exports that account for about half of Taiwan's gross domestic product. Export orders, an indicator of shipments over the next one to three months, rose 5.38 percent in August from a year earlier, the smallest increase since May 2003.

`Dashed For Now'

``Because of its trade-reliant economy, the hopes of a strong domestic revival in Taiwan may be dashed for now,'' said Daniel Soh, an economist at Forecast Pte in Singapore. ``Foreign demand for Taiwan's investment and capital goods are falling. That weakens the Taiwan dollar.''

The island's currency fell as much as 0.2 percent to NT$32.012 against the U.S. dollar before trading at NT$31.966, according to Taipei Forex Inc.

Factory output in August rose 0.41 percent from a year earlier, the smallest increase since March 2007, when production shrank, the government said yesterday.

Indonesia's rupiah traded near a two-week high on speculation the central bank will buy the currency to curb volatility as the global credit crisis threatens to spur capital outflows.

`Guarding the Market'

The currency was little changed amid speculation local banks will need more rupiah to prepare for the long Muslim holidays next week. Asian shares fell for a second day on concern a U.S. rescue package for financial firms will be held up by Congress.

Bank Indonesia ``is guarding the market because they don't want turmoil in the local currency,'' said Muhammad Fauzi Halim, a currency trader at PT Bank Resona Perdania in Jakarta. ``Demand for the rupiah is also high now because of the long holidays.''

The rupiah traded at 9,335 per dollar from 9,330 yesterday, according to data compiled by Bloomberg.

Bank Indonesia sold dollars yesterday at 9,340 and the rupiah may trade between 9,310 and 9,340 today, Halim said.

Elsewhere, the Singapore dollar lost 0.2 percent to S$1.4151, the Thai baht fell 0.4 percent to 33.90 and Vietnam's dong was unchanged at 16,620. The Philippine peso advanced 0.5 percent to 46.330.

To contact the reporter on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net.