Asian Currencies: Won Declines to One-Week Low as Peso Weakens

By David Yong

Nov. 6 (Bloomberg) -- Asian currencies declined, with South Korea's won tumbling to the lowest in a week, on speculation overseas investors will sell regional assets as an economic slowdown deepens.

The won has weakened 30 percent this year, the most among 10 most-active currencies in Asia outside Japan, as regional stocks snapped a three-day rally. The Philippine peso dropped after U.S. shares had the biggest post-election loss after reports showed the job market and service industries weakened more than economists expected.

``There are many uncertainties and concerns about corporate earnings and economic performances and markets will be number- sensitive,'' said Kwon Goohoon, an economist at Goldman Sachs Group Inc. in Seoul. ``The volatility in the currency market will remain high until the end of this year.''

The won slumped 4.9 percent to 1,327.15 per dollar as of 12:40 p.m. local time, according to Seoul Money Brokerage Services Ltd. The rupiah fell 0.7 percent to 11,000 and the peso declined 0.9 percent to 48.485.

South Korea's Kospi Index of shares plunged 6 percent as global funds sold more local stocks than they bought this week, extending monthly outflows since June, according to stock exchange data. The MSCI Asia Pacific Index fell by the most since Oct. 27.

``Markets are pricing in a recession next year,'' said Ang Kok Heng, who manages $156 million as chief investment officer at Phillip Capital Management in Kuala Lumpur. ``There's a tactical shift out of non-U.S. dollar assets.''

Rate Cuts

Non-deliverable forwards show the won will gain to 1,315 in three months. Forwards are agreements in which assets are bought and sold at current prices for delivery at a specified future date. They are settled in dollars.

Seven of Asia's most-active currencies fell today, while the Chinese yuan and Hong Kong dollar were little changed. The U.S. currency also gained on the euro and British pound on speculation policy makers in Europe and England will cut interest rates to revive their economies.

The euro declined 0.9 percent to $1.2841 against the dollar. The dollar was quoted at $1.5794 per pound versus $1.5910.

Risk Premium

The peso fell on concern slowing growth will damp exports and remittances from overseas workers.

Global investors yesterday demanded 6.01 percentage points more than U.S. Treasury yields to own emerging-marker debt, according to JPMorgan Chase & Co's EMBI+ Index. The risk premium jumped 37 basis points, ending a seven-day drop.

Taiwan's dollar fell to NT$32.845 per dollar from near a two-week high, as the slowest inflation in 14 months in October opens the way for the central bank to cut interest rates again, following reductions in September and October.

``Taiwan's vulnerability is strong in terms of external factors,'' said Christy Tan, a currency strategist at Bank of America Corp. in Singapore. ``Inflation's definitely not an issue compared to growth risks. As long as the momentum either way is not excessive, the central bank will likely let the Taiwan dollar trade according to market forces.''

Elsewhere, Malaysia's ringgit traded near one-week low 3.5410 per dollar, the Thai baht eased 0.4 percent to 35.07 and the Singapore dollar weakened to S$1.4858 from S$1.4802 yesterday. Vietnam's dong was little changed at 16,838.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net