Asian Currencies: Indonesian Rupiah, Korean Won Fall This Week

By Lilian Karunungan

Nov. 14 (Bloomberg) -- Indonesia's rupiah slumped this week, touching the lowest level since 2001, on concern restrictions on currency purchases will deter investors from buying the nation's assets. South Korea's won posted its second weekly loss.

Nine of the 10 most-active Asian currencies outside Japan weakened during the five days as the global financial crisis crimped demand for emerging-market assets. Indonesia will require companies and individuals based in the nation to seek approval for foreign-exchange purchases of more than $100,000 a month, Senior Deputy Governor Miranda Goeltom said Nov. 12.

``The market and both local and foreign banks are assessing what the short-term implications are in the change in rules'' for the rupiah, said Enrico Tanuwidjaja, an economist in Singapore at Oversea-Chinese Banking Corp., the nation's third- largest bank. ``Plus there are so few parties willing to let go of their dollars while demand is still pretty high.''

The rupiah slid 5.8 percent this week to 11,566 per dollar as of 3:40 p.m. in Jakarta, according to data compiled by Bloomberg. The currency, which weakened to a seven-year low of 11,988 yesterday, may fall to 12,000 this month, Tanuwidjaja said. The won declined 5 percent this week to 1,399.20, according to Seoul Money Brokerage Services Ltd.

The measures taken by Indonesia ``will amount to no more than increased administrative costs in rupiah transactions, reflected in wider bid and offer spreads, and thinner liquidity,'' Stewart Newnham, an analyst at Morgan Stanley in Hong Kong, wrote in a report to clients yesterday. ``The increased risk of capital controls is likely to deter capital inflows and expedite capital flight.''

Yen Gains

The yen rose, heading for weekly gains against the dollar and the euro, as signs of a deepening global economic slump prompted investors to pare holdings of higher-yielding assets funded in Japan.

The Japanese currency climbed to 96.82 per dollar from 97.68 late yesterday in New York and 98.24 at the end of last week. Against the euro, it was at 123.18 from 124.78.

South Korea's won reversed an earlier advance as overseas investors accelerated sales of the nation's assets, bolstering demand for dollars.

Overseas investors sold more Korean stocks than they bought on each of the past four trading days. The government and the central bank yesterday said they would provide an additional $16 billion to help exporters as the deepening credit crisis makes it harder for companies to obtain funds.

``There are some outflows from foreign investors selling stocks,'' said Kim Yule, a currency swap trader at BNP Paribas in Seoul. ``Unless the global financial turmoil settles, the Korean markets will find it difficult to recover stability.''

Taiwan Dollar

Taiwan's dollar completed a weekly decline, halting two weeks of gains, on concern the global slowdown will hurt the island's exports.

Global funds offloaded more of local shares than they bought on each of the past four days, stock exchange data show. Exports fell 8.3 percent in October from a year earlier as sales to China slumped, a government report showed Nov. 7.

``The uncertainty in the U.S. and global markets and continued outflows among foreign investors are still impacting Asian currencies,'' said Maya Pinto, an economist at IDEAglobal in Singapore. ``Growth for Taiwan will be downgraded further.''

The Taiwan dollar declined 0.8 percent this week to NT$33.079 versus the greenback, according to Taipei Forex Inc. It gained 0.3 percent today.

The local dollar is ``relatively stable'' as the South Korean won has posted a bigger decline, Taiwan's central bank said yesterday after the financial markets closed.

Elsewhere, the Malaysian ringgit dropped 1.2 percent this week to 3.5965 against the U.S. currency and Singapore's dollar slipped 1.5 percent to S$1.5153. The Thai baht was little changed at 34.94 versus 34.96 a week earlier. Vietnam's dong traded at 16,979.50 from 16,984 on Nov. 7.

To contact the reporter on this story: Lilian Karunungan in Singapore at at lkarunungan@bloomberg.net.