Asian Currencies: Won, Peso Lead Drop as Investors Shun Risk

By Aaron Pan and David Yong

Sept. 23 (Bloomberg) -- South Korea's won, Philippine peso and Indonesia's rupiah were the biggest decliners among Asian currencies on speculation investors will shun emerging-market assets on concern the U.S. won't avert a recession.

The peso and rupiah fell the most in more than a week as regional shares declined on concern the U.S. plan to buy $700 billion of soured assets of financial firms won't stem a global slowdown. Indonesia and the Philippines have foreign-currency debt ratings that are three levels below investment grade at Standard & Poor's. The Thai baht and the Malaysian ringgit rose following losses in the U.S. currency.

``With the uncertainties surrounding the U.S. bailout plan and expectations that this will not quickly turn around the economic problems in the U.S., people are a bit wary again,'' said Joey Cuyegkeng, a Manila-based economist at ING Bank NV.

The peso dropped 0.6 percent to 46.555 per dollar at the 4 p.m. close in Manila, from 46.283 yesterday, according to Tullett Prebon Plc. The rupiah declined 0.4 percent to 9,325 in Jakarta, according to data compiled by Bloomberg.

U.S. Treasury Secretary Henry Paulson submitted a plan to Congress over the weekend aimed at averting a credit freeze after the bankruptcy of Lehman Brothers Holdings Inc. and the government takeover of American International Group Inc.

The proposed financing plan has raised concern the U.S. debt ceiling will increase by 6.6 percent to $11.3 trillion.

`Market Players Cautious'

``Many market players are cautious because the U.S. government will need big money'' to rescue the financial system, said Masahiro Gao, vice president of the treasury at PT Bank Mizuho in Jakarta.

South Korea's won slumped, extending this year's loss to 19 percent, on speculation refiners will increase dollar purchases to pay bills after a surge in global oil prices. Crude oil for November delivery rose 6 percent to $109.37 a barrel yesterday. South Korea is Asia's third-largest oil importer.

``A big jump in oil prices is behind the won's weakness,'' said Lee Myung Hoon, a currency dealer with Industrial Bank of Korea in Seoul. ``Demand for the dollar is very strong.''

Korea's currency dropped 0.8 percent to 1,149 against the dollar, according to Seoul Money Brokerage Services Ltd. The won, which reached 1,157.50 today, touched a four-year low of 1,166.20 on Sept. 16.

The won may extend losses as foreign investors sold more Korean shares than they bought today, ending two days of net purchases, Lee said.

Political Situation

Thailand's baht advanced for a second day, reaching the highest in more than a month, as the dollar fell.

The baht also continued to find support on optimism new Prime Minister Somchai Wongsawat will be able to ease political turmoil after taking office last week. Somchai may unveil his cabinet by week's end and there's speculation he will call elections within the next few months.

``The baht is one of the strongest currencies in the past couple of days due to two factors,'' said Tetsuo Yoshikoshi, Asian foreign-exchange analyst at Sumitomo Mitsui Banking Corp. in Singapore. ``The first is the weaker dollar story due to concerns over the U.S. bailout plan. The second is the calmness in the Thai political situation.''

The baht strengthened as much as 0.6 percent to 33.68 a dollar, the highest level since Aug. 15, before trading at 33.77, according to data compiled by Bloomberg.

Singapore Dollar

Singapore's dollar jumped to the highest in a month as the U.S. dollar fell against major currencies that make up the local trade-weighted basket.

``The Singapore dollar's strength was all due to the U.S. dollar, which was thrashed last night against the majors,'' said Suan Teck Kin, a Singapore-based economist at United Overseas Bank Ltd. ``Further gains look limited as we are seeing so many signs of an economic slowdown.''

The local dollar rose as much as 0.9 percent to S$1.4051 against the U.S. currency, the highest since Aug. 22, before trading at S$1.4135, according to data compiled by Bloomberg.

Elsewhere, China's yuan reached 6.8099 per dollar, the strongest since a dollar link was scrapped in July 2005. Malaysia's ringgit was little changed at 3.4117 from 3.4114 yesterday. Taiwan's dollar added 0.3 percent to NT$31.937 and Vietnam's dong gained 0.7 percent to 16,620.

To contact the reporter on this story: Aaron Pan in Hong Kong at apan8@bloomberg.net; David Yong in Singapore at dyong@bloomberg.net.