Asian Currencies: Ringgit, Baht Fall on Concern Exports to Slow

By Lilian Karunungan and David Yong

Oct. 4 (Bloomberg) -- Malaysia's ringgit and the Thai baht fell this week on concern the deepening credit crisis will push the U.S. economy into a recession and reduce demand for Asian exports and emerging-market assets.

The Philippine peso and the Singapore dollar also declined as a regional stock index slumped 7.6 percent, the worst week in 13 months. Overseas investors pulled almost 26 billion ringgit ($7.5 billion) from Malaysia's debt market since April, according to data from the central bank.

``Some markets are going to be affected more than others and Malaysia relies a lot on the U.S. for electronic exports,'' said Joanna Tan, a regional economist at Forecast Pte in Singapore. The ringgit is falling because ``investors are shunning markets that are deemed riskier.''


The ringgit fell 0.9 percent this week to 3.4670 per dollar as of 4:15 p.m. yesterday in Kuala Lumpur, its biggest decline since the five days ended Sept. 5, according to data compiled by Bloomberg. The baht declined 0.8 percent this week to 34.21.

Global funds cut their investments in Malaysian debt for a third month in July, according to data published by Bank Negara Malaysia on its Web site. They reduced their holdings to 100.6 billion ringgit from 104.9 billion ringgit in June and a peak of 126.5 billion ringgit in April, the data show.

Growth Target

Malaysia may revise its economic growth forecast this year due to deepening global financial turmoil, Finance Minister Najib Razak said this week. The government ``will reevaluate its targets'' if the global financial crisis leads to a significant downturn, he said in Kuala Lumpur on Sept. 30.

The Thai baht had its first weekly loss in three on speculation Prime Minister Somchai Wongsawat will call elections soon, possibly leading to more political demonstrations. Anti- government protesters have occupied Government House in Bangkok since Aug. 26 and are calling for a new parliament.

``The global macroeconomic backdrop is hardly conducive for Asian currencies, including the baht,'' said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore. ``On top of that you have the domestic political uncertainties with the big question now on whether Somchai will call for elections and when.''

The baht is the third-worst performer of Asia's 10 most- active traded currencies this year after the South Korean won and Indian rupee.

Exports Slow

Thai exports rose at the slowest pace in five months in August and Commerce Minister Chaiya Sasomsup said on Oct. 2 overseas sales will probably increase no more than 20 percent this year, down from a previous estimate of 25 percent.

The government last month cut its 2008 economic growth forecast to 5.1 percent, from 5.6 percent, and said the economy will slow to between 4 percent and 5 percent next year as political uncertainty and turbulent global markets curb spending, investment and exports.

The Singapore dollar had its worst week in a month. Daiwa SB Investments Ltd. and Aberdeen Asset Management Asia Ltd. are selling the currency on speculation the central bank will limit its advance as the economy teeters on the brink of recession.

Policy Meeting

The Monetary Authority of Singapore will slow the pace of appreciation at its biannual foreign-exchange policy meeting on Oct. 10, according to seven of 14 strategists surveyed by Bloomberg News. Four expect gains to be halted, two expect a shift down in the range for the currency's moves and only one predicts no change.

The Singapore dollar dropped 1.4 percent in the five days to S$1.4488.

The Philippine peso fell a second week as the rising cost of borrowing dollars spurred local companies to sell pesos to get the U.S. currency. The peso declined for the fifth time in six days as the benchmark stock index dropped 1.8 percent, the most in more than two weeks.

``There is a lack of liquidity for dollars so companies and banks who need dollars have to sell pesos,'' said Marcelo Ayes, senior vice president for Treasury at Rizal Commercial Banking Corp. in Manila.

The peso declined 0.6 percent this week to 47.025, extending its losses this year to 12.2 percent, according to Tullett Prebon Plc.

Elsewhere, the Taiwan dollar lost 0.4 percent this week to NT$32.18 and Vietnam's dong was unchanged at 16,600. Markets were closed yesterday in South Korea, China and Indonesia for public holidays.

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