By David Yong
Nov. 6 (Bloomberg) -- Asian currencies declined, with South Korea's won tumbling the most in three weeks, on speculation overseas investors will sell emerging-market assets as a global economic slump deepens. Indonesia's rupiah hit a seven-year low.
Seven of the region's 10 most-active currencies excluding the yen fell after data yesterday showed service industries in the U.S. and Europe shrank at record rates in October, fanning concern recessions loom in the world's biggest economies. Stock benchmarks dropped across Asia, led by South Korea's Kospi index.
``The stock market is the key point in the won's movements these days,'' said Ko Yun Jin, a currency dealer at Kookmin Bank in Seoul, the country's largest lender. ``Foreign investors were buying the dollar after they sold local shares.''
The won slid 4.9 percent to 1,330.80 per dollar as of the 3 p.m. local time close of trading, according to Seoul Money Brokerage Services Ltd. The currency is down 30 percent this year, Asia's worst performance.
Indonesia's rupiah fell 1.1 percent to 11,050 per dollar, poised for the lowest close in Jakarta since 2001. The Philippine peso declined 0.9 percent to 48.495 and the ringgit lost 0.5 percent to 3.5410.
The yen gained against the euro on speculation the European Central Bank will slash interest rates today and signal more cuts are needed to stave off an economic slump. Japan's currency rose to 126.68 per euro from 126.87 late yesterday in New York.
The Kospi plunged 7.6 percent as global funds sold more Korean equities than they bought this week, extending monthly outflows since June, according to stock exchange data. The MSCI Asia Pacific Index fell 5.9 percent, the most since Oct. 27, when it closed at a five-year low.
Bond Sales
Bank Indonesia refrained from cutting its benchmark interest rate today to help stem an exodus of foreign investors. Policy makers kept the benchmark rate at 9.5 percent after six increases since May.
Overseas ownership of Indonesian government bonds fell 16 percent as of Nov. 4 from an August record, while the Jakarta Composite index has more than halved this year, headed for its worst annual performance on record. A central bank report yesterday showed yesterday foreign-exchange reserves slumped to $50.58 billion in October from $57.11 billion in September.
``The capacity of the central bank to intervene now has been somewhat reduced'' by lower reserves, said Enrico Tanuwidjaja, an economist at Oversea-Chinese Banking Corp. in Singapore. ``The rupiah will be weaker on the comeback of risk aversion to emerging markets.''
`Tactical Shift'
The ringgit weakened on concern investors will add to a record 19.1 billion ringgit ($5.4 billion) withdrawal from the local bond market. The Kuala Lumpur Composite Index has dropped 38 percent this year, poised for its worst year since the Asian financial crisis in 1997.
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. A basis point is 0.01 percentage point.
``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.''
India's rupee snapped a six-day rally, losing 0.3 percent to 47.590 per dollar. The Sensex Index of the nation's stocks dropped as much as 4.8 percent.
``The movement in the equity and currency market suggests concerns over global growth are far from over,'' said Vikas Babu, a currency trader at state-owned Andhra Bank in Mumbai.
Elsewhere, Taiwan's dollar traded at NT$32.819 versus NT$32.830 late yesterday in Asia, while the Thai baht slid 0.2 percent to 35.01. The Singapore dollar weakened 0.2 percent to S$1.4832 and China's yuan was little changed at 6.8250.
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net
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