By Judy Chen and Lilian Karunungan
Oct. 31 (Bloomberg) -- Asian currencies fell, led by Indonesia's rupiah, on concern that a global recession will damp demand for the region's assets.
The rupiah was headed for its worst month since 1998 as overseas investors sold more Indonesian shares than they bought. The MSCI Asia-Pacific Index of regional stocks dropped 2.2 percent, snapping a three-day rally, after the U.S. reported the largest drop in gross domestic product since 2001. Eight of the most-active Asian currencies outside of Japan fell today.
``The decline in stock markets is worrying,'' said Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. ``There is still a lot of demand'' for the dollar to meet month-end requirements.
The rupiah fell 2.7 percent to 11,000 per dollar as of 2:03 p.m. in Jakarta, according to data compiled by Bloomberg. The currency slumped 13 percent this month. The won weakened 3.2 percent to 1,291 per dollar, according to Seoul Money Brokerage Services Ltd.
Non-deliverable forwards contracts show traders are betting the rupiah will weaken 6.6 percent to 11,775 in a month compared with 11,475 yesterday. Forwards are agreements in which assets are bought and sold at current prices for delivery at a specified future date. Non-deliverable contracts are settled in dollars.
Japanese Yen
The yen rose, heading for a record monthly gain against the euro, as signs of a global recession prompted investors to sell higher-yielding assets funded by low-cost loans in Japan.
Japan's currency also advanced against the Australian and New Zealand dollars as commodities including gold and copper fell.
``Investors had positions using the dollar or yen to invest in the euro or emerging-market currencies,'' said Masataka Horii, one of four investors for the $47.9 billion Kokusai Global Sovereign Open fund in Tokyo, the biggest bond fund in Asia. ``Now people are rushing to close that position.''
The yen climbed to 122.92 per euro in Tokyo from 127.31 late yesterday in New York. Against the dollar, it was at 96.89 from 98.61.
South Korea's Won
South Korea's currency dropped for the first time in three days after manufacturers' confidence tumbled to a record low and factory output fell for a third month, adding to concern the economy may sink into its first recession since needing an International Monetary Fund bailout in 1997.
``What is heavily weighing on investors' minds is that the economy has yet to see the worst,'' said Chun Chong Woo, an economist with Standard Chartered First Bank Korea Ltd. in Seoul.
An index of manufacturers' expectations for November tumbled to 65 from 78 the previous month, the central bank said today. That's the weakest since monthly data began in 2003, and a score lower than 100 means pessimists outnumbered optimists.
Factory production fell 0.6 percent last month from August for the longest run of declines in almost eight years, the statistics office said today. Sales of consumer goods slipped 2 percent from a year earlier, the biggest drop in almost four years, and construction orders plunged 40.4 percent.
South Korea this week cut interest rates by a record and approved a guarantee of bank debts to revive the economy, which grew at the slowest pace in four years last quarter. President Lee Myung Bak's government plans a further stimulus package next week, adding to $20 billion in income-tax cuts and benefits and 8 trillion won ($6.3 billion) aid to builders already promised.
Malaysia's Ringgit
Malaysia's ringgit dropped, poised for a third month of losses, on speculation a U.S. economic slowdown will curb demand for Asian exports and trim investor purchases of emerging-market assets.
``The whipsaw in stock and currency movements suggests people are worried if companies can do well when the world is expected to fall into a recession,'' said Yeo Chin Tiong, head of treasury at OSK Investment Bank Bhd. in Kuala Lumpur. ``I don't see how markets can sustain any big rally.''
The ringgit traded at 3.5625 per U.S. dollar in Kuala Lumpur, according to data compiled by Bloomberg. The currency has weakened 3.5 percent this month as the Kuala Lumpur Composite Index of stocks fell to the lowest since June 2004 on Oct. 28.
U.S. gross domestic product declined 0.3 percent last quarter as consumer spending slumped. Malaysia shipped 11 percent of its exports to the U.S. this year, the nation's biggest overseas market after Singapore.
Malaysia, which in August forecast GDP will expand by 5.3 percent in 2009, will cut that growth target on Nov. 4, Finance Minister Najib Razak said this month.
Elsewhere, Taiwan's Dollar fell 0.4 percent to 32.94. The Philippine peso weakened 0.6 percent to 48.995. Vietnam's dong was little changed at 16,830. Singapore's dollar lost 1.5 percent to S$1.4836. India's rupee strengthened 0.6 percent to 49.425 per dollar.
To contact the reporter on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.
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