Asian Currencies: Won, Ringgit Lead Drop on Reserves, Exports

By David Yong

Nov. 4 (Bloomberg) -- South Korea's won declined, leading losses among Asian currencies, after the nation reported its biggest drop in foreign-exchange reserves since the Asian financial crisis.

Korea's currency, the region's worst performer this year, fell after the central bank said today its reserves slumped 11 percent to $212.3 billion in October, the most since the nation received a $57 billion loan from the International Monetary Fund in 1997. Singapore's dollar and Malaysia's ringgit tumbled on concern a slowdown in the U.S., the world's largest economy, will damp demand for Asian exports.

``Traders are probably focusing on the decrease in reserves,'' said Jay Won, a currency dealer at Korea Exchange Bank in Seoul. ``Nevertheless, the market has found some stability, which will reduce wild swings in movements.''

The won fell 2 percent to 1,288 against the dollar as of the 3 p.m. local time close, according to Seoul Money Brokerage Services Ltd. Singapore's currency slumped 0.7 percent to S$1.4792 and the ringgit weakened 0.2 percent to 3.5275 at 4 p.m. in Kuala Lumpur.

Traders bet the won will still advance to 1,260 per dollar in three months, while a similar contract for the ringgit shows the currency is likely to weaken to 3.5350, according to non- deliverable forwards contracts. Forwards are agreements in which assets are bought and sold at current prices for delivery at a specified future date. Non-deliverable contracts are settled in dollars.

Half of the 10 most-traded currencies in Asia outside Japan declined today after reports yesterday showed U.S. manufacturing fell in October at the fastest pace in 26 years, construction spending eased and auto sales at General Motors Corp. slumped 45 percent for the worst month since World War II.

Yen Gains

The yen advanced against higher-yielding currencies on speculation a series of global interest-rate cuts will make it less attractive to buy overseas assets using funds from Japan.

Japan's currency climbed to 125.13 against the euro from 125.33 late yesterday in New York. The yen rose 1 percent to 66.49 per Australian dollar and 0.9 percent to 154.30 versus the pound. It gained to 98.83 per dollar from 99.12.

Australia's central bank today lowered its benchmark cash target rate by three-quarters of a percentage point to 5.25 percent, the third cut in as many months, on evidence global financial turmoil is buffeting the economy.

Malaysia's ringgit fell from near a two-week high before a trade ministry report tomorrow that may show the nation's exports rose in September at the slowest pace in six months. The government will today reduce its growth forecast of 5.3 percent for 2009, Deputy Prime Minister Najib Razak said last month.

Curtail Demand

``The financial crisis has started to affect the real sector and that should curtail global demand,'' said Joanna Tan, an economist at Forecast Pte in Singapore. ``Trade is on a weakening trend and we expect further weakness in the ringgit.''

Malaysian export growth slowed to 6.6 percent in September from a year earlier, the least since March, according to the median forecast in a Bloomberg News survey of economists. The U.S. accounted for 11 percent of Malaysia's shipments this year, the most after Singapore.

Singapore's dollar weakened before a Singapore Institute of Purchasing & Materials Management report today that may show its key manufacturing index declined to 48.3 last month from 49.5 in September. A reading below 50 indicates factory output shrank.

Taiwan's dollar gained 0.1 percent to NT$32.864, as stock exchange data showed foreign investors bought more local shares than they sold for a fourth day in five.

Elsewhere, the Philippine peso was little changed at 48.505, erasing a loss of as much as 0.7 percent. The Thai baht declined 0.2 percent to 34.97 per dollar and China's yuan was little changed at 6.8376. Indonesia's rupiah gained 0.2 percent to 10,955 and India's rupee traded at 48.645 after falling as low as 48.9375.

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