Asian Currencies: Won, Singapore Dollar Fall on Growth Concerns

By Lilian Karunungan

Oct. 15 (Bloomberg) -- Asian currencies declined, led by South Korea's won, on concern that the U.S.-led efforts to ease a global credit crisis will not avert an economic slump.

Singapore's dollar and the Philippine peso also weakened as Asian stocks declined a day after rallying the most in a decade. The won has fallen 24.8 percent this year, the worst performance among Asia's 10 most-traded currencies, as companies and banks scrambled for dollars to service debt and foreign investors pulled a record $24 billion out of local stocks.

``The recessionary forces that have been unleashed in the recent leg of credit tightening remain well entrenched even as irrational fear over the financial crisis fades,'' said Yen Ping Ho, a currency strategist at JPMorgan Chase & Co. in Singapore, ``The negative growth consequences should weigh on Asian currencies during this quarter and in the first quarter of next year.''

The won fell 2.9 percent to 1,243.50 against the dollar as of 12:40 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. The currency dropped as much as 3.4 percent to 1,250. The Singapore dollar weakened 0.75 percent to S$1.4710 from S$1.4599 late in Asia yesterday. It reached S$1.4851 on Oct. 10, the lowest level since Oct. 4, 2007.

The Kospi stock index dropped 2.75 percent after rebounding 10 percent from a two-year low in the last two days as governments in the U.S. and Europe announced plans to invest in banks.

Risk Appetite

``The worst may be behind us but the won still remains the most susceptible Asian currency,'' said Dwyfor Evans, a currency strategist with State Street Global Markets in Hong Kong. ``When risk is back on, the won is bought back; when risk is taken off, it is sold.''

South Korea's foreign-exchange reserves dropped in each of the last six months, sliding $24.6 billion to $239.7 billion as policy makers intervened to stem the won's decline and pledged to inject foreign currency into the financial system.

Central banks intervene in currency markets by arranging sales or purchases of foreign exchange.

The Singapore dollar fell, snapping two days of gains, on concern the global credit crisis will prolong a recession in the island.

The city-state's currency dropped to near a one-year low after a government report showed last week the nation entered its first recession since 2002, spurring the central bank to end a policy favoring gains in the currency in an effort to support the economy.

Zero Appreciation

The Straits Times Index, the benchmark stock index, fell 2.2 percent following yesterday's 0.5 percent loss in the Standard & Poor's 500 Index.

The Monetary Authority of Singapore, which relies on the currency rather than interest rates as its policy tool, said on Oct. 10 it's shifting to a ``zero-percent appreciation'' stance. Gross domestic product contracted an annualized 6.3 percent in the third quarter from the previous three months, after shrinking a revised 5.7 percent between April and June.

The Philippine peso fell on concern a global economic slump will reduce overseas employment for Filipinos, curbing remittances that account for about a 10th of the nation's gross domestic product.

The peso snapped two days of gains after central bank Deputy Governor Nestor Espenilla said funds sent home by Philippine nationals working abroad may slow through next year as the financial crisis weakens global economies. The U.S., which bailed out its banking sector to thaw frozen credit markets, is the largest source of remittances and biggest buyer of Philippine exports.

`Cloudy Prospects'

``The prospects for remittances are cloudy because of what's happening in world economies, which could lead to a lot of Filipinos losing their jobs,'' said Catherine Tan, head of foreign exchange at Thomson Financial Asia in Singapore. ``A drop in remittances will affect dollar inflows and also hurt economic growth.''

The currency fell 0.6 percent to 47.507 in Manila, according to Tullett Prebon Plc. The currency, which reached an 18-month low of 47.82 on Oct. 10, may weaken to 50 by the end of the year, Thomson's Tan said.

Overseas remittance growth may slow to 15 percent this year from the 18 percent gain in the first seven months, Espenilla said yesterday. Money sent home by Filipino nurses, helpers and seafarers overseas may drop for the first time in eight years in 2009 as major economies slip into recession, he said two days ago in an interview.

Elsewhere, the Malaysian ringgit dropped 0.5 percent to 3.5104. The Thai baht fell 0.2 percent to 34.10 and Taiwan's dollar was at NT$32.397 versus yesterday's NT$32.388. The Indonesian rupiah weakened 0.1 percent to 9,780 and Vietnam's dong was little changed at 16,595.

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