Asian Currencies: Won Extends Loss, Baht Holds at One-Year Low

By Anil Varma and Kim Kyoungwha

Sept. 3 (Bloomberg) -- Asian currencies fell, with South Korea's won extending its slide to the lowest since October 2004, on speculation investors are pulling out of emerging markets amid a global economic slump.

The won, Asia's worst-performer this year, slumped for a fourth day as ABN Amro Bank NV and UBS AG predicted overseas investors will keep selling the nation's assets as government intervention fails to halt the drop. The economy grew 4.8 percent in the second quarter from a year earlier, the slowest pace in more than a year and the trade balance, which swung to a deficit in December for the first time in five years, recorded a shortfall of $3.23 billion in August.

``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 dropped 1.3 percent to 1,148.50 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. The won has slumped 19 percent this year, the worst performance among major Asian currencies, according to data compiled by Bloomberg.

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.

`Stern Action'

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 Singapore dollar fell for a third day after a central bank survey forecast the economy will expand at the slowest pace in five years in 2008. Growth will slow to 4.2 percent as manufacturing eases and exports decline, according to a survey of 20 economists by the Monetary Authority of Singapore released today.

``There's no doubt the economy is slowing down,'' said Thomas Harr, Singapore-based currency strategist at Standard Chartered Plc. ``There's no reason why Singapore should have a strong currency anymore.''

Singapore's currency weakened 0.5 percent to S$1.4394 at 4:30 p.m. local time, according to data compiled by Bloomberg. The currency will slide to S$1.49 per U.S. dollar by the end of June, Standard Chartered predicts.

`Dollar Strength'

Malaysia's ringgit fell for a fifth day 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 as much as 0.5 percent to 3.4430 per dollar, the weakest since Sept. 21, 2007, according to data compiled by Bloomberg. It was at 3.4425 in late trading.

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 27 percent from a record high of $147.27 touched in July.

Chinese Yuan

The Chinese yuan dropped against the dollar 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 0.1 percent to 6.8430 a dollar, according to the China Foreign Exchange Trade System.

Thailand's baht held near 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.

Thailand Intervenes

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. ``With general fears that Asian economies are slowing, the exacerbated political turmoil in Thailand is just adding coal to the fire.''

The baht was little changed at 34.47 against the dollar, compared with 34.46 yesterday, according to data compiled by Bloomberg. The currency may fall to 35 over the next two weeks, Yoshikoshi said.

Elsewhere, the Philippine peso weakened 0.3 percent to 46.730 against the dollar. 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.