Asian Currencies Fall, Led by Won, as Economic Concerns Mount

By Kim Kyoungwha and Clarissa Batino

Dec. 23 (Bloomberg) -- Asian currencies weakened, led by South Korea’s won, on concern a deepening global recession will hurt regional exports and prompt international investors to shun emerging-market assets.

Most Asian currencies fell as Taiwan reported a record slide in export orders for November and economists forecast a U.S. government report today will show new home sales in the U.S. reached a 17-year low. The won, which gained in each of the last two weeks, is set for its biggest annual decline since 1997 and the Philippine peso is set for its worst year since 2000.

“Investors are selling assets bought a few weeks ago as recent data show there are more risks, not less,” said Vishnu Varathan, a regional economist at Forecast Singapore Pte. “Recent gains in the peso and other regional currencies seem to be a bit overdone, considering the market’s view that there isn’t much to support the rally in 2009.”

South Korea’s won slumped 2.3 percent to 1,338 as of the 3 p.m. close in Seoul, according to Seoul Money Brokerage Services Ltd. It’s down 31 percent this year, the worst performance in Asia. The peso lost 0.2 percent to 47.425 in Manila, contributing to this year’s slide of 13 percent.

Taiwan’s export orders -- indicative of shipments in one to three months -- plunged by a record 29 percent from a year earlier in November, the Ministry of Economic Affairs announced today. That’s the biggest drop since Bloomberg started tracking the data in 1999 and more than double the decline forecast by economists in a Bloomberg News survey.

Exports Slump

Sales of new homes in the U.S., the world’s biggest economy, fell to an annual pace of 415,000 in November, according to economists surveyed by Bloomberg before a Commerce Department report today.

Japan, China, India and South Korea -- Asia’s four biggest economies -- have all reported drops in exports this month and, with the exceptions of the Philippines and Thailand, benchmark stock indexes fell today across regional bourses open for trading. Japan’s financial markets were closed for a holiday.

Overseas investors sold a net $37 billion worth of South Korean stocks this year and the Kospi stock index plunged 40 percent as a seizure in global credit markets prompted investors and banks to hoard dollars.

The won’s decline may be limited by speculation the authorities will support the currency to help prevent year-end exchange-rate moves undermining balance sheets for companies and banks, according to Park Hae Il, an options trader with Shinhan Bank in Seoul.

“As seen in the past months, the currency market is taking an early cue from stock movements,” Park said. “Nonetheless, the government’s intention to moderate the won’s loss ahead of year-end will be reflected in the market.”

Worst to Best

India’s rupee fell for a third day on speculation importers took advantage of recent gains to buy foreign exchange. The currency fell 1.4 percent to 48.72, paring this month’s advance to 2.8 percent. For the year, it’s down 19 percent, Asia’s second-worst performance.

The won and the rupee will be the region’s biggest gainers in 2009 as a recovering global economy spurs demand for emerging-market assets, according to Sherman Chan, an economist in Sydney with Moody’s Economy.com.

“They have the strongest potential to rebound,” he said. “Any recovery in risk appetite should see capital flowing back in.”

South Korea’s currency will rise 12 percent to 1,185 per dollar by end-2009 and India’s currency will strengthen 3.7 percent to 47 by the first quarter of 2010, Chan forecast.

Intervention

Taiwan’s dollar declined 0.5 percent to NT$33.085 per dollar, after yesterday sliding 1.2 percent, the most in seven years. Last week’s 2.4 percent weekly advance was the currency’s best performance in a decade.

The Central Bank of the Republic of China (Taiwan) bought between $100 million and $200 million last week, seeking to curb the Taiwan dollar’s appreciation, the Central News Agency said yesterday, citing unidentified traders.

“The central bank is taking the opportunity of thin trading activity this week to push the currency to a more competitive level for exports,” said Christy Tan, a currency strategist at Bank of America Corp. in Singapore. “The market thinks that the worst is not over yet. The natural reaction is to offload risky assets.”

The yen was little changed at 90.16 per dollar from 90.25 late yesterday in New York. The Japanese currency reached a 13- year high of 87.14 on Dec. 17.

Rate Cut

China’s yuan traded at 6.8527 a dollar, little changed from 6.8510 yesterday, after the People’s Bank of China cut interest rates for the fifth time since the start of September to spur growth in the world’s fourth-largest economy.

“The rate cut was modest but in line with policy to continue to ease,” said Irene Cheung, a corporate director for local-markets trading at ABN Amro Bank NV in Singapore. “We should position for China eventually allowing the yuan to weaken as exports will deteriorate further into 2009.”

Vietnam’s dong was little changed at 16,987.50 versus the dollar and Thailand’s baht fell 0.2 percent to 34.60. Indonesia’s rupiah rose 1.4 percent to 10,995 and Malaysia’s ringgit gained 0.4 percent to 3.4660.

To contact the reporters on this story: Kim Kyoungwha in Beijing at kkim19@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net.