Asian Currencies Set for Weekly Drop as Investors Sell Equities

By Aaron Pan and Bob Chen

Sept. 12 (Bloomberg) -- Asian currencies headed for a weekly decline, led by Taiwan's dollar, as overseas investors pulled funds out of the region's stocks.

Eight of the 10 most-traded currencies in Asia outside of Japan fell this week as funds abroad sold more shares than they bought in Taiwan, the Philippines and Thailand. The MSCI Asia- Pacific Index of shares was set for a two-week loss. Investors pared holdings of riskier assets as shares in Lehman Brothers Holdings Inc. slid on concern about its ability to raise capital.

``There's a lot of uncertainty weighing on the regional currencies right now,'' said David Cohen, director of Asian forecasting at Action Economics in Singapore. ``Volatility will likely continue for the near term. The equity markets everywhere are getting clobbered, so investors are shifting away from emerging markets.''

Taiwan's currency has fallen 0.6 percent this week to NT$32.065 as of 11:20 a.m. in Taipei, according to Taipei Forex Inc. The currency is set for an eighth week of losses, the longest losing streak since October 2005.

The local dollar is near a seven-month low on speculation the Central Bank of the Republic of China (Taiwan) will cut borrowing costs. The central bank may lower interest rates at its next policy meeting Sept. 25 to help the economy, the Economic Daily News reported, without identifying its sources.

Asian currencies were also hurt as the dollar rose to the strongest in a year against the euro on evidence the economic slump that began in the U.S. has spread to the rest of the world.

Net Sellers

Overseas investors were net sellers of Taiwan's stocks for nine of the last 11 trading days, selling NT$82.8 billion ($2.58 billion) more than they bought during that period as the Taiex index declined 11.7 percent.

The Taiwan dollar is ``relatively stable,'' the central bank said yesterday for the fifth time since Aug. 8.

The Philippine peso headed for its seventh weekly decline against the U.S. dollar, its longest losing streak since June.

The peso declined to the lowest level in a year as foreign funds sold Philippine shares every day this month. For the first seven months of the year, fund managers sold $397.2 million more Philippine bonds and stocks than they bought compared with a $3.6 billion net purchase for the comparable period in 2007, data from the central bank showed.

`Reducing Exposures'

``The peso's decline is driven by investors reducing their exposures in emerging markets including the Philippines,'' said Antonio Espedido, treasurer at China Banking Corp. in Manila.

The local currency fell 0.4 percent in the week to 47.015 per dollar, according to Tullett Prebon Plc. The peso is trading at the lowest since Sept. 12, 2007.

The Thai baht headed for its eighth weekly decline on concerns that the political impasse will drag on, deterring overseas investors.

The currency dropped to its lowest level in more than a year before lawmakers choose a new prime minister today, with the biggest party vowing to return Samak Sundaravej to office after he was ordered to step down by a court this week for accepting payments to host a cooking show.

``The political situation has passed a point of easy resolution,'' said Richard Yetsenga, a currency strategist at HSBC Holdings Plc in Hong Kong. ``Dollar-baht will continue to grind higher.''

Korean Debt Sale

The baht has fallen 0.4 percent this week to trade at 34.74, according to data compiled by Bloomberg. It earlier fell to 34.86 to the dollar, its lowest level since Aug. 23, 2007, when it traded at a low of 35.79.

The baht will drop to 36.0 by year-end, Yetsenga said.

South Korea's won fell for a second day after the government delayed a $1 billion bond sale, fueling speculation that foreign investors will dump the nation's assets.

The won has slumped 15 percent this year, the worst drop among the 10 most-active Asian currencies, on concern the country is headed for a repeat of the 1997 financial crisis. The government didn't want to pay more than 200 basis points over the 10-year U.S. Treasury yield, according to Choi Jong Ku, a director general at the finance ministry in Gwacheon.

``Buying sentiment for the won worsened after the postponement of the debt,'' said Jay Won, a currency dealer with Korea Exchange Bank in Seoul. ``There are few incentives to bolster the purchase of the won at the moment.''

The won fell 0.3 percent to 1,112.60 per dollar, according to Seoul Money Brokerage Services Ltd.

Elsewhere over the past week, the Malaysian ringgit held at 3.4545, the Singapore dollar was little changed at S$1.4383 and the Indonesian rupiah lost 0.9 percent to 9,455. Vietnam's dong was little changed at 16,595.

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