Asian Currencies: Peso, Rupiah Fall as Lehman Bankruptcy Looms

By Lilian Karunungan and Karl Lester M. Yap

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

The peso extended a seven-week slide after Asian shares declined as Lehman Brothers Holdings Inc. neared 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 rupiah added to three weeks of losses.

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

The peso dropped 0.20 percent to 46.985 per dollar as of 11:25 a.m. in Manila, according to Tullett Prebon Plc. The rupiah fell 0.2 percent to 9,458 in Jakarta, from 9,435 on Sept. 15, according to data compiled by Bloomberg.

Bank of America Corp. agreed to buy Merrill Lynch & Co. for about $44 billion, a person with knowledge of the deal said, after shares of the third-biggest U.S. securities firm fell by more than 35 percent last week.

Risk Positions

``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's that going to affect risk positions.''

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 rupiah's drop is part of a global adjustment in currencies and Bank Indonesia will stay in the market to support the rupiah, Governor Boediono said in Jakarta on Sept. 12.

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,''

The ringgit fell 0.1 percent to 3.4478 in Kuala Lumpur, according to data compiled by Bloomberg. The currency has slumped almost 5 percent in the past three months.

Political Tension

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 him, 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.

Elsewhere, the Singapore dollar rose 0.5 percent to S$1.4280. The Thai baht gained 0.4 percent to 34.54. Taiwan's dollar fell 0.1 percent to 32.072. Vietnam's dong was little changed at 16,585 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.