Asian Currencies: Korean Won, Rupiah Fall on Credit Concerns

By Lilian Karunungan and Kim Kyoungwha

Oct. 7 (Bloomberg) -- Asian currencies fell, with South Korea's won touching the lowest level since 2001, 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. Indonesia's rupiah traded near the weakest since January 2006 and the Philippine peso declined 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 4.4 percent to 1,327.70 per dollar as of 1:07 p.m. local time, according to Seoul Money Brokerage Services Ltd. The currency touched 1,364.05 today, the weakest since April 2001. It has dropped 30 percent this year. The rupiah fell 0.3 percent to 9,608 in Jakarta, compared with 9,575 yesterday, according to data compiled by Bloomberg.

The MSCI Asia-Pacific Index of regional shares dropped 1.3 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. The government provided funds to the won-dollar swap market, he said.

Foreign Reserves

South Korea is the world's sixth-largest holder of 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.

Indonesia's rupiah dropped for a second day as the Jakarta Composite Index added to yesterday's 10 percent slide. The currency earlier touched 9,675, the weakest since January 2006.

President Susilo Bambang Yudhoyono said yesterday his government aims to keep economic growth at 6 percent amid the credit crisis ``tsunami'' that started in the U.S.

``Overseas investors are changing their portfolio of rupiah assets to U.S. dollars,'' said Iwan Ridwan Gunandar, a currency dealer at PT Bank CIMB Niaga in Jakarta. ``The market is worried about the domino effect from the United States.''

Rate Decision

Funds abroad sold more Indonesian stocks than they bought yesterday, when markets reopened after a four-day holiday.

Gunandar said the rupiah is likely to trade between 9,600 and 9,700 per dollar today.

Bank Indonesia will raise its benchmark interest rate by 25 basis points today to 9.5 percent, the sixth increase this year, according to the median estimate of 19 economists in a Bloomberg News survey.

The Philippine peso fell to the lowest in 1 1/2 years as the banking crisis worsened in Europe, adding to concern more lenders will fail. The Philippine Stock Exchange Composite Index slid for a third day, extending its decline to 11 percent over the past month.

``This is panic point for every region you can imagine,'' and the peso is no exception, said Christy Tan, a currency strategist at Bank of America Corp. in Singapore. ``There's a crisis of confidence emanating from across regions. It still has more room to go unless we see more drastic measures.''

Thai Crisis

The currency fell 0.3 percent to 47.555 in Manila, according to Tullett Prebon Plc. It touched 47.78, the weakest level since May 2007.

The Thai baht declined for a fifth day as police fired tear gas to disperse protesters who were blocking the Parliament building to prevent Prime Minister Somchai Wongsawat from presenting his new administration's policies.

``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 0.1 percent to 34.43 in Bangkok, 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 14.3 percent.

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.

The Singapore dollar fell 0.1 percent to S$1.4611. The Malaysian ringgit weakened 0.1 percent to 3.4845. Taiwan's dollar lost 0.1 percent NT$32.426 and Vietnam's dong dropped 0.2 percent to 16,625. Financial markets in Hong Kong are closed today for a public holiday.

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