Asian Currencies Decline: Won Sinks to Decade-Low; Rupiah Falls

By David Yong

Oct. 8 (Bloomberg) -- Asian currencies fell against the greenback, with South Korea's won tumbling to a decade-low, as a deepening credit crisis encourages investors to shun emerging markets and prompts banks to hoard dollars.

The won slumped as much as 4.7 percent today to a level last seen during the 1997-98 Asian financial crisis, when the nation had to take out a $57 billion emergency loan from the International Monetary Fund to meet overseas debt payments. Deputy Finance Minister Shin Je Yoon yesterday said the government will check for ``speculative forces'' in the market and use its foreign-exchange reserves to defend the currency.

``The overall tone in the market is bleak with traders extremely cautious about taking won positions in spite of repeated assurances from the government,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul. ``There is persistent real demand for dollars from companies.''

The won fell 4.5 percent to 1,390.50 against the dollar as of 2:48 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The cost to protect the nation's sovereign debt against default rose to a record.

All 10 of Asia's most-active currencies outside of Japan declined today.

Shares Slide

Indonesia's rupiah dropped 0.7 percent to 9,635 per dollar, close to the lowest in almost three years. The stock exchange halted trading following a 10 percent drop in the Jakarta Composite index, Asia's worst-performing benchmark today.

Shares tumbled across the region, extending a global sell- off that's erased more than $5 trillion of market value in the past week alone. The MSCI Asia-Pacific Index dropped 7 percent as reports the U.K. government is preparing a rescue package for banks including the Royal Bank of Scotland Group Plc highlighted the severity of the seizure in credit markets.

The International Monetary Fund said the global economy is headed for a recession next year, with expansion in the U.S. forecast to almost grind to a halt.

Bank Indonesia Governor Boediono said on Oct. 5 the nation's exports are cooling, damping growth in Southeast Asia's biggest economy.

``The market is pretty much driven by growth fears,'' said Philip Wee, a senior currency strategist at DBS Group Holdings, Southeast Asia's largest bank. ``Indonesia will not buck the trend in the region.''

Emerging-Market Risk

The Philippine peso fell 0.4 percent to 47.56 per dollar, approaching a 17-month low. President Gloria Arroyo yesterday asked her economic advisers to draw up a ``contingency plan'' to cope with the possible recession in the U.S., the biggest buyer of the nation's exports and No. 1 source of remittances from overseas workers.

``Risk aversion continues as the credit crisis spreads outside of the U.S., prompting investors to stay away from emerging markets,'' said Rafael Algarra, treasurer at Security Bank Corp. in Manila.

Global investors yesterday demanded 5.03 percentage points more than U.S. Treasury yields to own emerging-marker debt, the highest premium since June 2004, according to JPMorgan Chase & Co's EMBI+ Index.

Slower Exports

Malaysia's ringgit dropped to a one-year low after a government report today showed overseas sales slowed more than economists forecast in August. Exports grew 10.6 percent from a year earlier, the slowest pace since February.

``The financial crisis is still lingering with the stock slump and there continues to be a lot of risk aversion,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur.

The ringgit lost 0.2 percent to 3.4992 per dollar. Elsewhere, the Thai baht dropped 0.1 percent to 34.52 per dollar and the Singapore dollar weakened to S$1.4707 from S$1.4647. Taiwan's dollar eased 0.3 percent to NT$32.446 and the Vietnamese dong was unchanged at 16,610.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net;