Asian Currencies: Peso, Ringgit Decline on Lehman Bankruptcy

By Lilian Karunungan and Karl Lester M. Yap

Sept. 15 (Bloomberg) -- The Philippine peso and the Malaysian ringgit fell on concern deepening credit-market losses will prompt global funds to prefer safer bets to emerging-market assets.

The peso extended a seven-week slide as Asian shares slid after Lehman Brothers Holdings Inc. filed for bankruptcy and the U.S. government said it won't bail out the investment bank. Foreign funds sold more Philippine shares than they bought every day this month, according to data compiled by Bloomberg. The ringgit has slumped 5.2 percent in the past three months.

``After Lehman declared bankruptcy, people will want to avoid additional risks and emerging-market assets are considered risky,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila.

The peso dropped 0.40 percent to 47.08 a dollar as of the 4 p.m. close in Manila, according to Tullett Prebon Plc. The ringgit fell 0.4 percent to 3.4565 in Kuala Lumpur, according to data compiled by Bloomberg.

Bank of America Corp., the biggest U.S. consumer bank, agreed to buy Merrill Lynch & Co. for about $50 billion after shares of the third-biggest U.S. securities firm fell by more than 35 percent last week.

Political Tension

Malaysia's ringgit weakened on speculation domestic political tension will escalate and global financial turmoil will deter investors from buying regional assets.

The government on Sept. 13 ordered the arrest of an opposition lawmaker, a political blogger and a local newspaper reporter as racial tensions flared.

``Offshore funds are not going to be enticed, they will probably wait for lower levels with the market turmoil in the backdrop,'' said Suresh Kumar Ramanathan, a rates and currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. ``Political risks have risen a few notches and that will likely exert pressure on the ringgit market,''

Last week's arrests, under a law allowing detention without trial, came as Opposition Leader Anwar Ibrahim seeks to persuade government-aligned lawmakers to defect to his party, aiming to topple Abdullah Ahmad Badawi's government as early as this week. Anwar needs at least 30 of 222 lawmakers from Abdullah's coalition to control parliament.

The government released the reporter after a 20-hour detention. The move may only have a short-term impact on the economy, Second Finance Minister Nor Mohamed Yakcop said, according to a Sept. 13 report from state news agency Bernama.

India's rupee slumped to a two-year low on concern investors will dump riskier assets.

The rupee dropped for a fifth day as local traders sold the currency, taking a cue from its decline in the overseas non- deliverable forwards market, said Paresh Nayar, head of currency and debt trading at Development Credit Bank Ltd. in Mumbai.

Stocks Decline

``Concerns about a pullout of investors from emerging- markets is driving rupee sales,'' Nayar said. ``Also, the NDF market is influencing the rupee's trend.''

The rupee fell 0.5 percent to 45.93 in Mumbai, adding to last week's 2.3 percent slide, Bloomberg data show. It earlier touched 45.995, the lowest since September 2006.

Indian stocks fell, with the Bombay Stock Exchange's Sensitive Index, or Sensex, declining as much as 6.1 percent.

Indonesia's rupiah weakened as the Jakarta Composite Index of shares dropped 2.9 percent, taking this month's loss to 19 percent.

Shake-Up

``Nobody's going to buy the rupiah for now,'' said Gundy Cahyadi, an economist at IDEAglobal in Singapore. ``The market will be waiting for the conclusion of Lehman Brothers and the shake-up in Wall Street banks and how that's going to affect risk positions.''

The rupiah fell 0.3 percent to 9,460 in Jakarta, from 9,435 on Sept. 15, according to data compiled by Bloomberg. The rupiah reached 9,488 per dollar on Sept. 12, the weakest since January.

``We know the central bank is still supporting the rupiah,'' Cayhadi said. ``My view is that they're not going to let it cross the 9,500 mark easily.''

The central bank will intervene ``if needed'' to defend the rupiah, Deputy Governor Hartadi A. Sarwono said in Jakarta today. Central banks intervene in currency markets by arranging purchases or sales of foreign exchange.

Elsewhere, the Singapore dollar rose 0.3 percent to S$1.4316 against the U.S. currency and The Thai baht gained 0.3 percent to 34.58. Taiwan's dollar was little changed at NT$32.039 and Vietnam's dong traded at 16,590 compared with 16,580 on Sept. 15. Financial markets were closed in South Korea, China and Hong Kong for public holidays.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Karl Lester M. Yap in Manila at kyap5@bloomberg.net.