Asian Currencies: Won Extends Drop, Ringgit Falls for 5th Day

By Anil Varma and Kim Kyoungwha

Sept. 3 (Bloomberg) -- Asian currencies declined, with South Korea's won falling past 1,150 per dollar for the first time since August 2004, on speculation investors are pulling out of emerging markets amid a global economic slump.

The won slumped for a fourth day as importers may have bought the dollar, which gained against the yen and euro. A decline of almost 5 percent in oil prices this week stoked speculation the Federal Reserve's monetary policy will help the U.S. economy outperform Europe and Asia.

``There is more downside to Asian currencies from a re-flow of capital out of Asia,'' said Irene Cheung, a Singapore-based strategist at ABN Amro Bank. ``The decline could accelerate in the next two months because banks in the U.S. and Europe are pulling out. They are short of cash and need to recapitalize toward year-end.''

Korea's won traded at 1,152.90 per dollar as of 1:30 p.m. in Seoul, from 1,134.00 yesterday, according to Seoul Money Brokerage Services Ltd. The won has slumped 19 percent this year, the worst performance among major Asian currencies, according to data compiled by Bloomberg. Six of the 10 most-active Asian currencies outside of Japan declined.

Crude oil settled at $109.71 a barrel yesterday on the New York Mercantile Exchange, the lowest close since April 8. The commodity has fallen almost 26 percent from a record high of $147.27 touched in July.

`Further Sell-Offs'

``Given that the psychologically important 1,150 barrier was broken through, I can't tell for sure what will be the next line,'' said Chu In Young, a dealer with state-run Korea Development Bank in Seoul. ``Without strong intervention, the won has only one way to go.''

South Korea will take ``stern action'' to stem the won's slide and concerns the nation is facing a financial crisis are ``groundless,'' the nation's Vice Finance Minister Kim Dong Soo said in Gwacheon yesterday.

The won will weaken to 1,200 per dollar by year's end, the weakest since 2003, amid ``further sell-offs'' of Korean stocks, ABN's Cheung forecasts.

Malaysia's ringgit fell for a fifth day to an 11-month low after a slide in oil prices and a slump in regional stocks boosted demand for the U.S. currency. The Kuala Lumpur Composite Index dropped for a second day.

``The dollar strength is quite overwhelming not only against the ringgit but across the region,'' said Yahya Mohd Nor, head of currency trading at Affin Bank Bhd. in Kuala Lumpur. ``Asian growth is also slowing down and there appears to be little support from the central bank for the ringgit.''

The ringgit fell 0.4 percent to 3.4415 per dollar, the weakest since Sept. 24, 2007, according to data compiled by Bloomberg. The currency may weaken to 3.4450 this week, Yahya said.

Chinese Yuan

The Chinese yuan dropped for a second day on speculation cheaper crude oil will bolster economic growth in the U.S., the world's No. 1 energy user.

Traders pared bets since mid-July on how far the yuan will rise in the next 12 months as the dollar rebounds. The People's Bank of China has managed the yuan's exchange rate against a basket of currencies, including the euro, the yen and the British pound, since a peg to the dollar was abolished in 2005.

``The dollar is rising so fast against major currencies,'' said Wen Li, a Beijing-based dealer at Bank of China Ltd., the country's biggest foreign currency trader. ``Traders have turned more cautious and refrained from betting on the yuan's one-way appreciation.''

The yuan dropped 0.2 percent to 6.8475 a dollar, according to the China Foreign Exchange Trade System.

Thailand Intervenes

Thailand's baht rose, snapping a three-day slump that took it to the lowest in more than a year, on speculation the central bank will support the currency after Prime Minister Samak Sundaravej declared a state of emergency.

The currency yesterday fell to the weakest since August 2007 after clashes in Bangkok between thousands of pro- and anti-government protesters left one dead and 43 injured. The central bank ``intervened'' to support the baht, Deputy Governor Atchana Waiquamdee said yesterday.

``I don't think the currency has stabilized,'' said Tetsuo Yoshikoshi, a Singapore-based market analyst at Sumitomo Mitsui Banking Corp. ``Even after the suspected intervention, the dollar-baht pair has been bid quite nervously. With general fears that Asian economies are slowing, the exacerbated political turmoil in Thailand is just adding coal to the fire.''

The baht rose 0.1 percent to 34.43 against the dollar, according to data compiled by Bloomberg. It slumped to 34.54 yesterday, the weakest level since Aug. 23, 2007. The currency may fall to 35 over the next two weeks, Yoshikoshi said.

Elsewhere, the Singapore dollar weakened 0.4 percent to S$1.4388. Vietnam's dong fell 0.3 percent to 16,610. India's financial markets in Mumbai were closed for a local holiday.

To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.