Asian Currencies Fall on Week, Led by Rupiah, on Risk Aversion

By Judy Chen and Ron Harui

Nov. 21 (Bloomberg) -- Asian currencies fell this week, led by Indonesia's rupiah, as investors flee emerging markets to avoid risk from a deepening global economic slump.

Nine of the 10 most-active currencies in Asia dropped this week as the MSCI Asia Pacific Index slumped 6.9 percent, the worst since the five-day period ended Oct. 24. The rupiah fell to a decade low after Bank Indonesia Governor Boediono said the deposit guarantee agency will take over the operations of PT Bank Century, Indonesia's 13th-biggest bank by market value, to provide more security for customers.

Indonesia's rupiah dropped 8.1 percent for the week to 12,600 a dollar as of 2:46 p.m. in Jakarta. It plunged as much as 6.5 percent to 13,150, the lowest level since August 1998. South Korea's won declined 6.4 percent this week, according to Seoul Money Brokerage Services Ltd. It earlier touched 1,524.50 a dollar, the weakest since March 1998.

``Sentiment is likely to remain negative on Asian currencies and equity markets, given concerns over the duration and depth of a global recession,'' said Jimmy Koh, head of treasury research at United Overseas Bank Ltd. in Singapore.

U.S. stocks tumbled yesterday, with the Standard & Poor's 500 Index dropping 6.7 percent to its lowest in 11 years, as economic data pointed to a worsening recession and lawmakers postponed a vote on a plan to salvage the auto industry.

Dumping Shares, Bonds

The rupiah is Asia's worst performer in the past month, sliding 22 percent, as overseas investors sold more Indonesian shares than they bought every day in November except five. Foreign ownership of the nation's bonds declined to 89.99 trillion rupiah ($7 billion) as of Nov. 18, from 106.66 trillion rupiah in August, the finance ministry said.

``The U.S. markets are down sharply and that means there's more risk aversion for emerging markets and the rupiah will be one of those badly hit,'' said Euben Paracuelles, a Singapore- based economist at Royal Bank of Scotland Plc.

Paracuelles said he's looking to revise his forecast for the rupiah, which he had estimated would touch 11,700 by the first quarter of next year.

Governor Boediono said today the central bank will defend the rupiah as the Jakarta Composite Index of shares dropped 9 percent so far this week, extending its loss this year to 58 percent.

Non-deliverable forward contracts show traders are betting the rupiah will weaken to 14,450 in a month. Forwards are agreements in which assets are bought and sold at current prices for delivery at a later specified time and date.

Intervention Watch

South Korea's economy will shrink 3 percent in 2009, UBS AG forecast today, revising an earlier projection for 1.1 percent growth. Policy makers have cut interest rates at an unprecedented pace, guaranteed banks' debt and announced a 14 trillion won ($9.3 billion) stimulus package to spur expansion.

``The upward pressure on the dollar is still there as global stocks falter,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul. ``With the exchange rate above 1,500, investors are watchful that the authorities may intervene.''

Korean President Lee Myung Bak cautioned against intervention in the currency market, on-line newswire Edaily reported today. ``The foreign exchange should be left alone,'' Lee told reporters at a meeting of the 21-member Asia-Pacific Economic Cooperation in Lima, the Korean-language report said.

Central banks intervene in currency markets by arranging purchases or sales of foreign exchange. The won rose 0.1 percent today to close at 1,495 per dollar.

Funding Currency

The yen was set for a third winning week against the dollar and the euro on speculation the slump in global stocks will prompt investors to sell higher-yielding assets and pay back loans in Japan.

``Money is flowing back to funding currencies like the yen,'' said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co. Ltd., a unit of Japan's largest brokerage. ``It's difficult to change the trend of stock declines pushing up the yen. Until we reach a conclusion on U.S. automakers, risk is off the table.''

The yen traded at 94.95 per dollar in Tokyo versus 97.14 last week in New York. Japan's currency was at 118.86 per euro from 122.39 on Nov. 14.

The Philippine peso slid, weakening past 50 a dollar for the first time in two years, after a report yesterday that showed U.S. jobless claims at the highest since 1982 raised concern remittances from overseas Filipino workers will decrease. The peso fell 1.3 percent this week to 50.018 a dollar.

Elsewhere, India's rupee slumped 2.5 percent this week to 50.245 a dollar. Taiwan's dollar dropped 0.9 percent to NT$33.388 and Singapore dollar weakened 1 percent to S$1.5317. Thailand's baht fell 0.6 percent to 35.24 and Vietnam's dong was little changed at 16,972.

-- With reporting by Clarissa Batino in Manila, David Yong, Lilian Karunungan, Ron Harui in Singapore, Stanley White in Tokyo and Kim Kyoungwha in Beijing. Editors: Sam Nagarajan, James Regan

To contact the reporters on this story: Judy Chen in Shanghai at xchen45@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.