Asian Currencies Fall, Led by Rupiah and Won, on Growth Concern

By Judy Chen

Nov. 18 (Bloomberg) -- Asian currencies declined, led by Indonesia's rupiah and South Korea's won, on concern a global recession will damp demand for emerging-market assets.

Eight of Asia's 10 most-traded currencies in Asia outside of Japan fell against the greenback today as the MSCI Asia- Pacific Index of shares slid 2.1 percent, extending this month's loss to 5.7 percent. The rupiah slumped to a decade-low after overseas investors sold more Indonesian shares than they bought on all but four trading days this month. Global funds also cut their holdings of Korean stocks for a sixth day, helping drive the won to its weakest level in almost three weeks.

``The worst of the violent adjustments of positions is over, but what's left is a great deal of pessimism about the global growth in 2009 and Asian currencies,'' said Sean Callow, a currency strategist with Westpac Banking Corp. in Sydney. ``It's hard to see a change in the sentiment any time soon.''

The rupiah fell as low as 12,225 per dollar, the weakest since September 1998, before trading down 2 percent at 12,090 as of 12:36 p.m. in Jakarta. The won reached 1,432 per dollar, the weakest since Oct. 29, before trading 1.3 percent lower at 1,428, according to Seoul Money Brokerage Services Ltd.

The two currencies are this month's worst performers in Asia, having dropped 9.8 percent and 5.6 percent, respectively, versus the dollar.

`Protracted Financial Crisis'

Indonesia's government yesterday reported the economy grew 6.1 percent from a year earlier in the three months through September, the slowest pace in six quarters. The benchmark Jakarta Composite share index dropped 5.4 percent today, set for its lowest close this month.

``The markets see a protracted financial crisis,'' said Iwan Ridwan Gunandar, a currency dealer at PT Bank CIMB Niaga in Jakarta. ``Stocks are declining every day because of the global slowdown.''

South Korea's Kospi index fell 2.3 percent, also set for this month's worst finish, and the won weakened for a sixth day.

``It may take some time until the market sees stability because fears of a global recession are fueling sentiment for a strong dollar,'' said Kim Sung Soon, a currency dealer with Industrial Bank of Korea in Seoul.

The Bank of Korea sold $2 billion of the U.S. currency directly to local banks, as planned, at its weekly auction in the foreign-exchange swap market today.

The central bank said it decided not to disclose the swap point because revealing it could ``increase market volatility.'' Three-month swap agreements were sold with a swap point of minus 13.24 at an auction a week ago. The point shows the difference between forward and spot exchange rates, and a decline signals dollar liquidity is worsening.

Risk Aversion

The dollar rose against the yen on speculation overseas investors are buying more of the safest U.S. assets as a global recession deepens.

``We've got this pervasive risk aversion, and we are seeing dollar assets as attractive in a world permeated by fear,'' said Adam Carr, senior economist at ICAP Australia Ltd. in Sydney. ``I'm bullish on the U.S. dollar.''

The dollar climbed to 96.65 yen from 96.43 yen. It may strengthen to 105 yen by year-end, Carr forecast.

Elsewhere, Vietnam's dong rose 0.2 percent to 16,946 against the greenback and Malaysia's ringgit was little changed at 3.6020. Taiwan's dollar fell 0.3 percent to NT$33.25, India's rupee weakened 0.6 percent to 49.62 and the Thai baht dropped 0.1 percent to 35.02.

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