By Anil Varma and Kim Kyoungwha
Oct. 23 (Bloomberg) -- Asian currencies fell, led by South Korea's won and Taiwan's dollar, as the region's stocks extended a global equity rout.
The won declined to the lowest since 1998 on concern demand for the nation's assets and exports is dwindling amid a deepening global economic slump. Korea's economy probably grew at the weakest pace in four years last quarter, a Bloomberg survey showed. Nine of the 10 most-traded Asian currencies outside Japan declined today.
``Foreign stock sales are heavily weighing on the won,'' said Kim Yule, a currency dealer with BNP Paribas in Seoul. ``Traders are on the lookout for intervention but the won is set for further weakness as demand for dollars is so strong.''
The won fell 3.4 percent to 1,408.80 per dollar at the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. The Kospi stock index slumped 7.5 percent as overseas investors sold more shares than they bought for a seventh day, according to Korea Exchange. The won has lost 33.2 percent this year, making it Asia's worst performer.
Korea's gross domestic product rose 0.6 percent from the previous quarter, when it advanced 0.8 percent, according to the median estimate of 16 economists surveyed by Bloomberg News. The government will report the data tomorrow.
The MSCI Asia-Pacific Index of regional shares dropped as much as 5.2 percent after the Standard & Poor's 500 Index fell 6.1 percent yesterday. Japan's Nikkei 225 Stock Average slumped 2.5 percent today.
Support for Housing
The dollar rose to the highest against the euro in almost two years on speculation the U.S. government will increase support for the housing market.
The currency advanced for a seventh day on bets the European Central Bank will favor interest-rate cuts to support the 15-nation economy. The Wall Street Journal reported the U.S. may spend $40 billion to prevent more home foreclosures, citing a person familiar with the plan. The yen trimmed gains as U.S. stock futures climbed and Asian stocks pared losses.
``After this news came out, stock futures rose and the currency market went into reverse,'' said Motonari Ogawa, director of currency trading in Tokyo at Barclays Capital Inc., a unit of the U.K.'s third-biggest bank. ``This is somewhat positive for the dollar.''
The U.S. currency touched $1.2728 per euro, the strongest since November 2006, before trading at $1.2824 versus $1.2855 late in New York yesterday. The dollar also traded at 97.59 yen from 97.66 yen.
Taiwan's dollar dropped for a seventh day on concern the island's electronics exports may shrink as global demand slows.
Slower Growth
The currency fell to a 17-month low as a government report today will show export orders rose last month at the slowest pace in more than six years, according to a Bloomberg News survey of economists. Taiwan Premier Liu Chao Shiuan said yesterday his government will lower its 2009 economic growth forecast from 5.08 percent, without giving a new figure.
The Taiwan dollar is dropping ``because of the potential slump in the semiconductor industry and the fact that the Korean won has depreciated a lot,'' said Irene Cheung, a corporate director for local-markets trading at ABN Amro Bank NV in Singapore. ``As a big competitor in this industry, there is a need to catch up.''
The currency weakened as much as 1.3 percent to NT$33.408 against the U.S. dollar, the lowest level since May 2007, before trading at NT$33.29, according to Taipei Forex Inc.
Global funds sold more of the island's shares than they bought on all but one day this month as the benchmark Taiex index dropped 15 percent, according to stock exchange data.
Risk Premium
Malaysia's ringgit fell to its lowest in almost two years as the prospect of a global recession and concern Argentina will default encouraged investors to shun emerging-market assets.
The ringgit declined for a third day versus the dollar. Investors demanded 8.02 percentage points more than U.S. Treasury yields to buy emerging-market debt, JPMorgan Chase & Co's EMBI+ Index shows, the highest premium since November 2002.
``The risk has gone up with bond yields spiking since the start of this month and people are de-leveraging,'' said Nikhilesh Bhattacharyya, an economist in Sydney at Moody's Economy.com. ``That's driving the currency market.''
The ringgit slid as much as 0.9 percent to 3.5768 per dollar, the weakest since December 2006, before trading at 3.5715 in Kuala Lumpur.
Argentina Concerns
Economists at Deutsche Bank AG forecast the Group of Seven nations' economies will contract 1.1 percent next year, the most since the Great Depression. Argentine President Cristina Fernandez de Kirchner said two days ago she plans to take over 10 private pension funds to protect retirees from turmoil in financial markets, fueling speculation the government needs the cash to meet debt payments.
India's rupee slid as much as 1.2 percent to 49.86 a dollar, an all-time low, while the Philippine peso touched 48.997, the weakest level since March 2007.
Elsewhere, the Thai baht fell 0.4 percent against the U.S. currency to 34.66 and the Singapore dollar dropped 0.1 percent to S$1.5015. The Indonesian rupiah slipped 0.1 percent to 9,985 and Vietnam's dong was unchanged at 16,850.
To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net; Kim Kyoungwha in Beijing at 2309 or kkim19@bloomberg.net.
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