Asian Currencies Fall in Week, Led by Won, on Capital Outflows

By Anil Varma and Kim Kyoungwha

Sept. 6 (Bloomberg) -- Asian currencies had a weekly decline, led by South Korea's won and Indonesia's rupiah, on signs investors are dumping emerging-market assets as a deepening U.S. slowdown threatens to damp global growth.

The won fell for a sixth week, the longest losing streak since 2001, as global funds sold local stocks and a central bank report confirmed yesterday that Asia's fourth-biggest economy expanded at the slowest pace in more than a year.

``Market players are cautious about unrest in global financial markets, which is strengthening sentiment for the dollar,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. ``Importers' deals and stock sales are knocking the wind out of the won.''

The currency fell 2.6 percent to 1,117.80 per dollar this week in Seoul, according to Seoul Money Brokerage Services Ltd. It rose 1 percent yesterday. It is the worst performer among the 10 most-active Asian currencies outside of Japan this year, with a 16.6 percent loss.

The won's slide this year, the steepest since at least 2000, sparked speculation South Korea may witness a repeat of 1997, when the currency lost half its value and the country turned to the International Monetary Fund to help companies repay debt. UBS AG and ABN Amro Bank NV this week predicted investors will continue selling the currency, betting the economy will falter.

Enough Reserves

``There is no need to be dispirited by assuming a very bad scenario,'' Bank of Korea Governor Lee Seong Tae told lawmakers on Sept. 4, adding the credit crunch is a ``global phenomenon.'' Lee said the central bank has enough foreign-currency reserves to help protect the economy from external shocks.

Gross domestic product grew 4.8 percent in the second quarter from a year earlier, the central bank said yesterday.

The currency extended a rebound from near a four-year low yesterday on speculation the Bank of Korea bought the won to stem losses. Central banks intervene in currency markets by arranging sales or purchase of foreign exchange.

Indonesia's rupiah had its worst week since June 2007 as the Jakarta Composite Index plunged to a one-year low yesterday. Foreigners were net sellers of Indonesian equities this month. The Philippine peso completed a sixth weekly loss as the local benchmark stock index declined 1.1 percent yesterday, the biggest drop since Aug. 19.

Paring Holdings

``Risk aversion is making investors pare holdings of commodities and stocks and cutting down exposures to emerging markets,'' said Enrico Tanuwidjaja, an economist at Oversea- Chinese Banking Corp. in Singapore.

The rupiah weakened 1.3 percent yesterday and 2.4 percent through the week to 9,375 to the dollar, according to data compiled by Bloomberg. The peso fell 2 percent this week to 46.833 in Manila, according to Tullett Prebon Plc. It weakened 0.7 percent yesterday.

Malaysia's ringgit fell to the lowest level in almost a year as investors reduced their holdings of local assets on signs an economic slowdown is spreading beyond the U.S.

The currency completed its worst week in 15 months as the MSCI Asia-Pacific Index of shares fell for a fifth day and political turmoil in Malaysia and Thailand escalated.

``The political-risk premium has increased in the region, so that's not helping,'' said Suresh Kumar Ramanathan, a strategist at CIMB Investment Bank Bhd. in Kuala Lumpur.

The ringgit fell 1.9 percent this week to 3.4595 per dollar in Kuala Lumpur, Bloomberg data show. It dropped 0.8 percent yesterday. The Thai baht weakened 1 percent to 34.59 in Bangkok, with yesterday's loss at 0.5 percent.

Protests, Referendum

Malaysian Prime Minister Abdullah Ahmad Badawi said on Sept. 4 the ringgit's decline hasn't ``reached a worrying level.''

Thailand plans to hold a referendum on how to end an impasse after protesters seeking to oust Prime Minister Samak Sundaravej occupied Government House in Bangkok. Samak said on Sept. 4 he won't step down. Malaysian opposition leader Anwar Ibrahim has pledged to topple Abdullah's government by Sept. 16 through defections by lawmakers.

Elsewhere, the Singapore dollar declined 1.7 percent this week to S$1.4382 against the U.S. currency and the Taiwan dollar slid 1.1 percent to NT$31.875. India's rupee weakened 1.7 percent to 44.66 and Vietnam's dong slipped 0.4 percent to 16,595.

To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net