Asian Currencies Drop, Led by Rupiah, on Risk Aversion Concerns

By Judy Chen

Nov. 17 (Bloomberg) -- Asian currencies fell, led by Indonesia's rupiah, on concern that investors will shun regional assets after the Group of 20 nations delayed agreeing on measures to combat a global financial crisis.

Six out of the 10-most traded Asian currencies excluding the yen fell against the dollar after government reports today and last week showed Japan and Hong Kong have slid into recessions. The rupiah, Asia's worst performer, fell toward the weakest level since 2001 before a report that may show Indonesia's economy grew at the slowest pace in two years.

`There was no indication in the G-20 statement that additional assistance will come up for emerging markets,'' said Dwyfor Evans, a currency strategist at State Street Global Markets in Hong Kong. ``In this sort of environment, the decline of the Asian currencies is just a continuation of the risk- aversion sentiment.''

The rupiah declined 2.9 percent to 11,925 versus the dollar as of 9:18 a.m. in Jakarta, according to data compiled by Bloomberg. The Philippine peso dropped 0.6 percent to 49.67, the weakest since December 2006, according to Tullett Prebon Plc. The Singapore dollar fell to S$1.5256, the lowest level since Sept. 11, 2007.

The G-20 urged a ``broader policy response'' and set a March deadline for recommendations on improving regulations at a summit that ended in Washington on Nov. 15. Leaders of G-20 countries met as a seizure in credit markets, stemming from losses of $964 billion on securities tied to home loans, threatened to trigger a global recession.

Flight From Risk

Indonesia's economic growth slowed to 5.9 percent last quarter from a year earlier, compared with 6.4 percent in the previous three months, according to a Bloomberg News survey before the statistics bureau report today.

``Global growth is giving skepticism to the market,'' said Gundy Cahyadi, an economist at IDEAglobal in Singapore. ``There's nothing world leaders can do. That's weighing on the markets, including the rupiah.''

Overseas investors sold more Indonesian shares than they bought on each of the trading days this month except three, according to stock exchange data.

The Philippine peso fell for the fourth time in five days on speculation the deepening global slowdown will curb dollar inflows from exports and remittances.

``We expect exports and remittances to weaken in this kind of global environment and that, coupled with less foreign investment and hot money flows going out is affecting the peso,'' said Ricky Cebrero, a treasurer at East West Banking Corp. in Manila.

`Markets Are Jittery'

The central bank will report overseas remittances for September today. Exports and remittances make up about half of the Philippines' $144 billion economy.

``The markets are jittery and the speculation is that the global crisis isn't over and will spill over to 2009,'' Cebrero said. ``Against this backdrop, the peso will tend to weaken in line with other regional currencies.''

The peso is likely to depreciate past 50 per dollar in the coming weeks, Cebrero said.

The yen strengthened to 121.60 per euro in Tokyo from 122.39 late in New York on Nov. 14. Japan's currency rose to 96.93 per dollar from 97.14.

``Disappointment over the G-20 meeting will spur yen gains,'' said Tsutomu Soma, a Tokyo-based bond and currency dealer at Okasan Securities Co. ``The global economy will be in trouble for a long time, so investors won't be willing to take on risk.''

Japanese Recession

Japan's government today reported that gross domestic product fell at an annualized 0.4 percent pace in the three months ended Sept. 30, after sliding at a 3.7 percent rate in the previous quarter. Economists predicted 0.1 percent growth, a Bloomberg survey showed.

`The implications of the data are positive for the yen,'' said Toru Umemoto, chief currency analyst in Tokyo at Barclays Capital, Britain's third-biggest lender. ``A weak economy will feed into risk aversion and this will strengthen the yen.''

Japan's currency may rise to 92 per dollar by year-end, he said. Volatility implied on one-month dollar-yen options climbed to 28.50 percent from 26.63 percent late in New York on Nov. 14, indicating greater exchange-rate fluctuation risks that may erode profit on carry trades and hurt corporate earnings.

Elsewhere, Vietnam's dong was little changed at 16,980. Malaysia's ringgit dropped 0.06 percent to 3.5977. Taiwan's dollar fell 0.1 percent to NT$33.12. India's rupee rose 0.3 percent to 48.85 and the Thai baht strengthened 0.2 percent versus the dollar to 34.97.

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net