Asian Currencies Fall, Led by Indonesian Rupiah, as Shares Drop

By Judy Chen

Nov. 19 (Bloomberg) -- Asian currencies weakened against the dollar, led by Indonesia's rupiah, as regional stocks fell for a third day on speculation investors will dump emerging- market assets as a global recession deepens.

The rupiah, Asia's biggest loser in the past month, approached a decade-low after a government report on Nov. 16 showed the country's economy grew at the slowest pace in six quarters. Seven of the 10 most-active currencies in Asia outside Japan declined today as the MSCI Asia Pacific Index dropped 1 percent, set for the worst finish in three weeks.

``We've been seeing net selling of Asian stocks across the board by foreigners and outflows related to the stock market, which is a major factor in the currencies' decline,'' said David Mann, senior strategist at Standard Chartered Plc in Hong Kong. ``Asian currencies will stay weak going into the first half.''

The rupiah slid 0.8 percent to 11,950 per dollar as of 12:16 p.m. in Jakarta, according to data compiled by Bloomberg. It yesterday reached 12,225, the weakest since September 1998. Malaysia's ringgit fell 0.2 percent to 3.6087 in Kuala Lumpur.

Benchmark stock indexes in China, Hong Kong, India, Indonesia, Singapore, Thailand and Vietnam have all plunged more than 50 percent this year.

``Growth remains the dominant concern for emerging-market Asia,'' said Goh Puay Yeong, a Singapore-based currency strategist at Barclays Plc, a unit of the U.K.'s second-biggest bank. ``That's continuing to weigh on their currencies.''

The rupiah, which has slumped 18 percent in the past month, may weaken to 12,500 per dollar by the end of next month, Goh forecast.

Recessions

The ringgit traded near the lowest level since 2006 as stocks declined on concern demand for the nation's exports will wane after its key overseas markets, the U.S., Japan and Singapore, fell into a recession. The three countries together accounted for 37 percent of Malaysia's shipments in the first nine months of this year, according to the trade ministry.

``The economic fundamentals are weakening and the ringgit is also trading on sentiment as well in the global markets,'' said Gundy Cahyadi, an economist at IDEAglobal in Singapore. ``The concern is how much longer'' can the authorities ``sustain their intervention'' in the currency market.

The ringgit outperformed other Southeast Asian currencies such as the Indonesian rupiah and Philippine peso this week on speculation Bank Negara Malaysia bought the local currency to slow its depreciation.

Ringgit Intervention

The central bank's foreign-exchange reserves slumped $22.4 billion in the last two months to $100.2 billion, central bank figures show. Governments intervene in foreign-exchange markets by buying or selling currencies.

``Dollar-ringgit remains well supported despite further reports of smoothing activity by Bank Negara,'' strategists at Standard Chartered Plc including Singapore-based Callum Henderson said in a research note today. ``The risk is that it may cut interest rates earlier than expected given the worsening external environment and likely hit to exports.''

The yen rose against the dollar as speculation U.S. lawmakers will fail to agree a bailout for the country's automakers fanned risk aversion, damping demand for higher- yielding overseas assets funded with Japan's currency.

A $700 billion U.S. financial stability package isn't intended to prevent General Motors Corp., Ford Motor Co. and Chrysler LLC from collapsing, Treasury Secretary Henry Paulson said in a House hearing yesterday.

Stronger Yen

``It seems unlikely that the U.S. will pass legislation this year to help its carmakers,'' said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth-largest publicly traded lender by assets. ``Once this filters through the markets, this will push up the yen.''

The yen climbed to 96.53 against the dollar in Tokyo from 97.03 late yesterday in New York. It rose to 121.77 per euro from 122.43. The yen may rise to 96.20 versus the dollar today, Yoshida said.

Elsewhere, Vietnam's dong and the Thai baht were little changed, trading at 16,977 and 35.04, respectively, against the dollar. China's yuan was recently at 6.8300 from 6.8284 late yesterday in Shanghai.

Taiwan's dollar fell 0.1 percent to NT$33.276, South Korea's won weakened 0.2 percent to 1450.70 and the Singapore dollar fell 0.1 percent to S$1.5289. India's rupee dropped 0.2 percent to 49.75 and the Philippine peso slid 0.1 percent to 49.987.

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