Asian Currencies Fall, Led by Philippine Peso, on Risk Aversion

By Aaron Pan

Sept. 26 (Bloomberg) -- Asian currencies declined, led by the Philippine peso, on concern investors will shun the region's assets as negotiations on a proposal to inject $700 billion into U.S. financial markets stalled.

Seven out of the 10 most-traded Asian currencies, including Malaysia's ringgit and Thailand's baht, fell after lawmakers splintered over a proposed rescue plan to alleviate the credit squeeze. U.S. Senate Banking Committee Chairman Christopher Dodd said an agreement he had reached earlier in the day with some Republicans was later undermined by a proposal offered by House Republicans led by Representative Eric Cantor.

``We've got some impact from a sudden turn of sentiment that the U.S. Congress may not have actually made some progress as markets had initially thought,'' said Vishnu Varathan, a regional economist at Forecast Singapore Pte. ``The side of the coin that Asians will look at is the risk aversion bit and that doesn't bode well for the peso.''

The local currency dropped 0.3 percent to 46.585 per dollar as of 11:50 a.m. in Manila, from 46.440 yesterday, according to Tullett Prebon Plc. The peso, which dropped 0.07 percent from a week ago, may decline to 46.65, Varathan said.

Malaysia's ringgit fell for a fourth day on concern export growth will slow as U.S. government reports showed new home sales and orders for durable goods declined in August and jobless claims rose. Malaysia shipped 13 percent of its total exports to the U.S. in the first seven months of this year, making it the second-biggest overseas market after Singapore.

`Markets Still Shaky'

``The chances of a recession have increased and that's affecting all the key export markets for Malaysia,'' said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. ``Markets are still on shaky and volatile ground.''

The ringgit dropped 0.2 percent to 3.433 per dollar, according to data compiled by Bloomberg.

Taiwan's dollar declined for a third day after the central bank unexpectedly reduced interest rates yesterday for the first time since 2003, saying the global financial crisis has heightened the risk of an economic slowdown.

``In the near term, we could still see some weakness in the Taiwan dollar, mainly because risk aversion remains at very elevated levels,'' said Maya Pinto, an economist at IDEAglobal in Singapore. ``But in the medium to longer term, once the U.S. financial crisis blows over, among the regional currencies we'd expect the Taiwan dollar to outperform again.''

The island's currency fell as much as 0.2 percent to NT$32.068 against the U.S. dollar, according to Taipei Forex Inc. It last traded at NT$32.028, headed for its first weekly gain in 10 weeks.

Thai Baht Falls

Thailand's baht declined, paring the week's gain, on speculation global financial turmoil and doubts over how long the new prime minister will stay in office will deter investors.

The Thai government yesterday lowered its gross domestic product growth estimate for 2008 and warned that the economy may slow further next year. President George W. Bush warned this week that the U.S., one of Asia's biggest markets for exports, risks recession unless a $700 billion rescue plan for the banking sector is passed by Congress.

``Political uncertainty remains as no one knows if the new government will last more than three months,'' said Nicholas Bibby, an economist at Barclays Plc in Singapore. ``Inflation still lingers, the balance of payments deficit may worsen and it's an adverse backdrop for emerging markets.''

The baht dropped 0.1 percent to 33.96 against the dollar, according to data compiled by Bloomberg, cutting gains this week to 0.6 percent. The currency may weaken to 38 by the end of the first quarter of next year, said Bibby.

Elsewhere, the Singapore dollar traded little changed at S$1.4223 against the U.S. currency after gaining 1 percent this week. The South Korean won was little changed at 1,158.70, slumping 1.6 percent in the week. Indonesia's rupiah added 0.2 percent today to 9,369 and Vietnam's dong rose 0.1 percent to 16,600.

To contact the reporters on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.