Asian Currencies: Korean Won, Rupee Fall on Credit Concerns

By Lilian Karunungan and Kim Kyoungwha

Oct. 7 (Bloomberg) -- South Korea's won slumped to a seven- year low and the Indian rupee fell on speculation deepening turbulence in global financial markets will prompt investors to steer clear of emerging-market assets.

The won, Asia's worst-performing currency this year, tumbled as much as 7 percent, the most since December 1997 when the nation sought an emergency loan from the International Monetary Fund to meet debt payments. India's rupee declined to its weakest in almost six years and the ringgit fell to a 13- month low as stock markets in the region extended a slump.

``Sentiment is extremely unstable as the crisis seems to be spreading fast,'' said Jay Won, a currency dealer at Korea Exchange Bank in Seoul. ``People are panicking and they only want to hold dollars.''

The won tumbled 4.7 percent to 1,328.10 per dollar as of the 4 p.m. local close, according to Seoul Money Brokerage Services Ltd. The currency touched 1,364.05, the weakest since April 2001 and is down 30 percent this year. The rupee fell as much as 0.7 percent to 48.14 per dollar, the lowest since December 2002, before trading at 48.08 in Mumbai, according to data compiled by Bloomberg.

The MSCI Asia-Pacific Index of regional shares dropped 1 percent, taking losses over the past four days to more than 9 percent. Benchmark stock indexes in Japan, Singapore, Malaysia and Indonesia have all lost more than 30 percent this year.

The Korean government will use its currency reserves to provide funds when needed, Deputy Finance Minister Shin Je Yoon said today. Finance Minister Kang Man Soo yesterday urged banks to sell overseas assets to raise cash they can use to lend to companies struggling with rising offshore borrowing costs.

Foreign Reserves

South Korea is the world's sixth-largest holder of foreign reserves, which fell for a fifth month in August to $243.2 billion, according to the central bank, as policy makers intervened to stem the won's slide.

Asian currencies trimmed losses after the Reserve Bank of Australia lowered interest rates by a full percentage point to 6 percent, bigger than the median estimate of a half-point cut.

India's rupee declined for a third day after the local benchmark share index fell to its lowest in more than two years.

``The rupee will weaken further as investors continue to pull out of the equity market,'' said Krishnamurthy Harihar, a treasurer at Development Credit Bank Ltd. in Mumbai. ``The turmoil across global markets is going to affect the sentiment on the local currency.''

Thai Baht

The Thai baht declined for a fifth day as Deputy Prime Minister Chavalit Yongchaiyudh resigned after dozens of anti- government protesters were injured as police cleared a blockade of Parliament, quashing reconciliation efforts to end a five- month standoff.

``The political situation in Thailand is extremely fluid,'' said Joseph Tan, Asia chief economist at Credit Suisse in Singapore. ``We are not bullish on the Thai baht at all.''

The baht dropped 0.2 percent to 34.46, according to data compiled by Bloomberg. The currency is this year's third-worst performer in Asia after the Korean won and the Indian rupee, with losses of 14 percent.

Police fired tear gas at demonstrators who attempted to prevent lawmakers from entering the Parliament building to hear the government's policies. Protesters accuse the government of being a proxy for former leader Thaksin Shinawatra, who fled to the U.K. in August to escape corruption charges.

Malaysian Ringgit

Malaysia's ringgit fell for a fourth day on speculation overseas investors are taking money out of the country as local stocks decline.

``Capital will keep leaving the region until at least the end of the year and the ringgit will keep depreciating,'' said Nikhilesh Bhattacharyya, an economist in Sydney at Moody's Economy.com. ``It's not such a bad thing if bank lending does slow in some markets, but this will still hurt exporters and businesses.''

The ringgit declined 0.1 percent to 3.4915, according to data compiled by Bloomberg. The currency reached 3.5078, the weakest since September 2007.

Elsewhere, Indonesia's rupiah rose 0.13 percent to 9,566 per dollar and the Philippine peso was little changed at 47.40. The Singapore dollar fell 0.2 percent to S$1.4664. Taiwan's dollar was at NTS32.35 versus NT$32.343 yesterday. Vietnam's dong was little changed at 16,610.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net.