Asian Currencies: Won, Peso Lead Declines on Fund Outflows, Oil

By Anil Varma

Sept. 1 (Bloomberg) -- Asian currencies fell, with South Korea's won reaching the lowest level in almost four years, on speculation overseas investors are withdrawing funds from local bond and stock markets.

The won extended last month's 7 percent loss, the biggest since 1998 when the Asian financial crisis drove Korea to the brink of a national default. Won-buying by the government to check losses in the currency may fail to stop its slide, said Roh Sang Chil, a dealer with Kookmin Bank in Seoul. Pictet Asset Management Ltd. and Aberdeen Asset Management Plc are betting the Bank of Korea will lose the battle to stem the won's drop.

``The market is receiving a lot of orders for the dollar from foreign stock sales and oil importers,'' Roh said. ``Offshore players are staying on the buy side too, despite caution against the intervention.''

The currency fell 2.2 percent to 1,111.55 against the dollar at 1:02 p.m. in Seoul, the weakest since November 2004, according to data compiled by Bloomberg. It fell 15 percent this year, the worst performer among 10 most-active regional currencies outside of Japan.

Government currency purchases failed to halt the decline and led to a $16.7 billion drop in foreign-exchange reserves in the four months through July to $247.5 billion. Central banks intervene in currency market by either selling or buying foreign exchange.

Higher Oil Prices

The Philippine peso fell to the lowest level in a year after oil prices rose, increasing the nation's demand for dollars used to pay for the commodity.

The peso declined the most in a week as crude gained after an approaching hurricane in the U.S. stopped most of its regional oil and gas output. The Philippines imports almost all of its oil requirements. Crude oil rose 0.9 percent to $116.45 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

``Higher oil prices are adding to the import bill,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila. ``The momentum is for a stronger dollar.''

The local currency declined 0.9 percent to 46.29 versus the dollar, according to Bloomberg data. That is the lowest since Sept. 18.

The Taiwan dollar fell to a six-month low on speculation a global economic slowdown will reduce demand for Asian goods and encourage the central bank to seek a weaker currency to support exports.

Slowing Growth

The currency declined the most since 2001 in August as the statistics bureau cut its 2008 growth forecast on Aug. 22 to 4.3 percent from 4.78 percent on slumping overseas orders. Overseas shipments advanced 8 percent from a year earlier in July, the smallest gain since May 2007. A weaker currency would help exports by making Taiwan's electronics products cheaper overseas.

``The trend still points to weaker Asian currencies,'' said Christy Tan, a currency strategist at Bank of America Corp. in Singapore. ``What's dragging not just Taiwan but the rest of the region is the fact that growth is slowing while inflation is still staying firm. Shoring up growth is gaining priority.''

The island's currency dropped as much as 0.4 percent to NT$31.634 against the U.S. dollar, the weakest since Feb. 21.

Indonesia's rupiah fell for a second day before government reports that economists forecast will show inflation held at a 22-month high and export growth slowed.

Inflation

Consumer prices rose 11.9 percent in August from a year earlier, after increasing by the same amount in July, according to a Bloomberg News survey of economists. Exports rose 30 percent in July from a year earlier, slowing from a 34.9 percent increase in June, a separate survey showed. Both the reports are due at 2:00 p.m. today in Jakarta.

``Many traders would like to see how the inflation data will affect the Jakarta stock exchange,'' said Lindawati Susanto, head of currency trading at Bank Resona Perdania Pt in Jakarta.

The local currency declined as much as 0.2 percent to 9,168 per dollar in Jakarta, according to data compiled by Bloomberg. The rupiah may trade between 9,150 and 9,200 this week, Susanto forecast.

Elsewhere, the Indian rupee declined 0.5 percent to a 17- month low of 44.16 against the U.S. currency, the Singapore dollar weakened 0.5 percent to S$1.4224 and Thailand's baht was little changed at 34.25. Vietnam's dong slipped 0.1 percent to 16,545.

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