Asian Currencies Decline, Led by Won, as Investors Sell Shares

By Aaron Pan and Kim Kyoungwha

Sept. 9 (Bloomberg) -- Asian currencies fell, led by South Korea's won, on concern investors will pare their holdings of emerging-market assets as the worst of the credit-market losses may not be over.

The won fell the most in a week after yesterday's biggest rally since 1999 as the nation's Kospi index of shares followed Asian equities lower. Seven of the 10 most-active currencies in the region outside Japan fell, including the Philippine peso and Thailand's baht, as the MSCI Asia-Pacific Index of stocks slumped 2.1 percent.

``It would be natural for the won to fall today after yesterday's spectacular rally,'' said Dariusz Kowalczyk, a currency strategist with CFC Seymour Ltd. in Hong Kong. ``I still expect the won to weaken through year-end because there are exogenous reasons such as high debt levels, rising current- account deficit and slowing growth.''

The currency fell 1.8 percent to 1,101.3 against the dollar as of the 3 p.m. close in Seoul, after rising 3.4 percent yesterday, according to Seoul Money Brokerage Services Ltd. The Kospi index fell 1.5 percent after rising 5.2 percent yesterday.

Korea's currency has slumped 15 percent this year, Asia's worst performer, on speculation the country is headed for a repeat of the 1997 financial crisis, which almost halved the value of the won and led the country to the brink of a default.

Global funds have sold more Korean shares than they bought every day since Aug. 1 except five, stock exchange data show.

Clive Granger

Deputy Finance Minister Shin Je Yoon said last week that Korean companies and banks are sound and speculation that the country is facing a financial crisis is ``groundless.''

The Philippine peso was the second-worst performer among the Asian currencies as Nobel prize-winning economist Clive Granger said yesterday more institutions will report losses related to the U.S. subprime-mortgage market. The U.S. government said Sept. 7 it will take control of mortgage firms Fannie Mae and Freddie Mac.

``The bailout doesn't really solve everything,'' said Euben Paracuelles, a Singapore-based economist at Royal Bank of Scotland Group Plc, the U.K.'s second-biggest bank. ``Risk- aversion is a major determinant in Asian currencies and the peso is one of those currencies that get hit immediately.''

The local currency fell 0.6 percent to 46.795 per dollar, near the weakest since September last year, according to Tullett Prebon Plc.

Malaysia's ringgit fell on concern political tensions will escalate as opposition leader Anwar Ibrahim seeks to topple the ruling government by next week.

`Dust Not Settled'

The currency weakened to near the lowest level in a year as investors deemed yesterday's rally of as much as 1.8 percent was unsustainable given signs the economy is slowing. Anwar, who returned to parliament last month after 10 years, faces trial tomorrow on charges he had sex with a man who had served as his aide.

``The market will continue to discount Malaysia because political risks will persist or escalate,'' said Ameer Ali Mohamed, head of research at JF Apex Securities Bhd. in Kuala Lumpur. ``The dust has not settled and this could affect the ringgit.''

The ringgit dropped as much as 0.8 percent to 3.4613 per dollar, according to data compiled by Bloomberg. The currency last traded at 3.4530.

Former Deputy Prime Minister Anwar on Aug. 7 pleaded not guilty to the sex charge, calling it a ploy to derail his political comeback.

Taiwan Dollar

Taiwan's dollar declined to the lowest in almost seven months on speculation overseas investors will increase sales of stocks as Asian equities declined.

The currency's drop took the loss so far in September to 1.1 percent as funds abroad sold more shares than they bought for six of the last eight trading days.

The island's currency declined as much as 0.4 percent to NT$31.931, the weakest since Feb. 12, according to Taipei Forex Inc. It closed at NT$31.872 versus NT$31.799 yesterday.

Taiwan's central bank bought about $200 million in late trading yesterday to slow the rise in the island's own dollar, the Commercial Times newspaper reported today, citing unidentified traders.

Elsewhere, the Singapore dollar lost 0.1 percent to S$1.4304, Indonesia's rupiah fell 0.1 percent to 9,323 and the Thai baht declined 0.2 percent to 34.61. Vietnam's dong was little changed at 16,590.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.