Asian Currencies: Rupiah Falls as Firms Prepay Loans; Won Drops

By Lilian Karunungan

Nov. 24 (Bloomberg) -- Indonesia's rupiah fell the most in four weeks on speculation companies were buying dollars to pay back loans before maturity. The South Korean won and the Thai baht also dropped.

The currency extended two weeks of losses even after the Indonesian central bank on Nov. 12 required companies and individuals based in the nation to seek approval for foreign- exchange purchases of more than $100,000 a month. South Korea's won traded near a decade-low against the U.S. dollar on concern Asia's fourth-largest economy will fall into a recession for the first time since 1998.

Businesses ``are afraid the rupiah will weaken sharply so they are converting their dollar loans'' into rupiah, said Emanuel Kurniawan, head of foreign-exchange trading at PT Bank CIMB Niaga in Jakarta. ``There is still big demand for dollars even after the regulation.''

The rupiah dropped almost 4 percent to 12,600 per dollar as of 2:46 p.m. in Jakarta, compared with 12,100 on Nov. 21, according to data compiled by Bloomberg. The won fell 1.2 percent to 1,514, according to Seoul Money Brokerage Services Ltd.

The Indonesian currency, which fell to a decade low of 13,150 last week, lost 20 percent in the past month, the worst performance among Asia's 10 most-active currencies outside Japan.

Recession Concern

The central bank will remain in the market to ``guard'' the currency, Bank Indonesia Governor Boediono said on Nov. 21.

The yen rose against the dollar and the euro on speculation that investors will reduce holdings of higher-yielding assets financed with loans from Japan amid concern the U.S. economy is in a recession. The currency climbed 0.8 percent to 95.19 as of 8:10 a.m. in London, from 95.94 in New York on Nov. 21. It gained 0.7 percent to 119.91 per euro from 120.71.

The won declined after the Maeil Business Newspaper reported local banks expect between 30 and 40 of the nation's 100 largest construction companies will seek liquidity support from creditors, without citing anyone.

``A recession is on the cards,'' said Daniel Soh, an economist at Forecast Pte Ltd. in Singapore. ``It's pretty clear that South Korea's exports are falling.''

South Korea's economy expanded at the weakest pace in four years last quarter as exports declined by the most in almost seven years and consumer spending stagnated. Corporate bankruptcies also rose to their highest level in more than three years in October.

Thai, Korea Growth Slows

The won reached 1,524.50 on Nov. 21, the lowest level since 1998. The currency dropped last week for the third time, sliding 6.4 percent. The Kospi index fell 3.4 percent today.

Banks will receive initial requests for financial help from local builders by today, the Maeil reported today. Construction companies can join the program until February 2010, the Korean- language newspaper said.

Thailand's baht fell for a fifth day after a report showed growth slowed in Southeast Asia's second-biggest economy and protests against the government intensified.

The baht traded near a 21-month low as protesters marched to parliament from the prime minister's office they've occupied for three months in their bid to oust the government. A government report showed today the economy slowed more than expected in the third quarter as exports cooled and violent political protests quashed domestic spending.

``The political situation is getting worse and could drag on for a while,'' said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore. ``The question on growth is how deep the slowdown will be and focus now has shifted to the Bank of Thailand cutting rates as early as the next meeting'' in December.

The baht fell 0.2 percent to 35.28 in Bangkok, according to data compiled by Bloomberg. The currency may trade between 35 and 35.50 this week, Yeo said. The baht reached 35.33, the lowest level since February 2007.

Regional Currencies

Gross domestic product expanded 4 percent last quarter from a year earlier, the government said today in Bangkok. The annual pace is unlikely to exceed 4 percent in the next two years amid a prolonged global recession, Finance Minister Suchart Thadathamrongvej said on Nov. 21.

Thailand's increasingly violent street protests have hampered the government's ability to implement spending plans as a looming global recession damps exports. Around 1,500 police are deployed at the Parliament building, government spokesman Nattawut Saikuar said. Military assistance can be called for if needed, he added, estimating the number of protesters at 20,000.

Still, ``risk appetite is slowly coming back'' to the baht and other regional currencies on speculation that the impact of the U.S. bailout and economic stimulus will improve global markets, Bank of America's Yeo said.

Elsewhere, the Taiwan dollar dropped 0.1 percent against the U.S. currency to NT$33.421. The Malaysian ringgit fell 0.2 percent to 3.6288 and the Philippine peso was little changed at 49.838. Singapore's dollar was at S$1.5306 versus S$1.5301 on Nov. 21. Vietnam's dong traded at 16,971.5 versus 16,972.

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