Asian Currencies: Taiwan Dollar, Yuan Drop on Slowdown, Stocks

By David Yong

Dec. 6 (Bloomberg) -- Asian currencies fell this week, led by Taiwan’s dollar and the Chinese yuan, after reports showed exports in the region slumped because of recessions in the U.S., Europe and Japan.

Eight of the region’s 10 most-traded currencies excluding the yen dropped this week as investors became net sellers of shares from South Korea, Thailand and the Philippines. The Korean won, Malaysia’s ringgit and Singapore’s dollar fell after manufacturing in China, the fastest-growing major economy, shrank by the most on record, damping regional trade outlook.

“Attention has been on the trade numbers” and that is likely to see the Taiwan dollar weaken further, said Maya Pinto, an economist at IDEAglobal in Singapore. “We’ve seen foreigners exiting the stock market in the past three session.”

Taiwan’s dollar declined 0.8 percent to NT$33.549, according to Taipei Forex Inc., after reaching NT$33.612, the weakest level since Oct. 28. The yuan’s five-day 0.7 percent drop to 6.8812 is the steepest since a dollar peg was scrapped in July 2005. The ringgit fell 0.4 percent to 3.6350, near the lowest in more than two years.

Taiwan’s exports dropped 12.4 percent in November from a year earlier, the most since February 2002, according to a Bloomberg News survey of economists before the Ministry of Finance report on Dec. 8.

Cutting Forecasts

Taiwan Semiconductor Manufacturing Co., the largest producer of chips designed by other companies, on Dec. 1 cut sales and profit forecasts for this quarter, while rival United Microelectronics Corp. yesterday asked employees not to forgo vacations for pay to save costs.

The Chinese yuan posted a weekly decline on speculation Treasury Secretary Henry Paulson’s calls for a stronger currency won’t stop China from weakening it to support exporters. Manufacturing in Asia’s second-largest economy shrank by the most on record and export orders plunged, the China Federation of Logistics and Purchasing said on Dec. 1.

Korea’s won lost 0.4 percent to 1,475.50 per dollar, extending a four-month slide as overseas investors pulled $37 billion out of local shares this year, according to Bloomberg data. Banks and companies sought more dollars to repay overseas debt amid a funding squeeze.

“Concerns over a shortage of dollars remain, with the funding difficulties at banks not showing any sign of thawing,” said Park June Geun, a currency dealer in Seoul at BNP Paribas, Europe’s third-largest bank by market value.

Korea’s one-year cross-currency swap rate was below zero for a record 12th day signaling demand for dollars. The swap, which should be positive for lending won because of higher benchmark interest rates, reached a record minus 0.7 on Dec. 4 versus an average of 3.3 percent in the five years before July 2007 when the global credit crunch began.

Slower Recovery

Malaysia’s ringgit added to four months of decline after the government on Dec. 4 said exports slumped 2.6 percent in October, the first decline since July 2007.

“If all the stimulus plans don’t kick in fast enough, recovery may take longer than expected in 2010,” said Wan Suhaimi Saidi, an economist at Kenanga Investment Bank Bhd. in Kuala Lumpur. “The bias will be for more rate cuts and that will likely have some impact on the ringgit.”

Bank Negara Malaysia lowered its overnight policy rate to 3.25 percent on Nov. 24, after holding it at 3.5 percent in 20 meetings since April 2006, citing exports slowdown and rising unemployment risks. Policy makers next meet on Jan. 21.

Rupiah Rallies

Indonesia’s rupiah capped its best week in more than seven years, rising 3.4 percent to 11,705 a dollar, on speculation a surprise central-bank cut in borrowing costs on Dec. 4 will revive appetite for the nation’s securities.

Bank Indonesia lowered its benchmark reference rate for bill sales to 9.25 percent from 9.5 percent to shield Southeast Asia’s biggest economy from the global recession. The central bank slashed its growth forecast for 2009 to 4.5 percent, the slowest in seven years.

Elsewhere, Thailand’s baht dropped 0.4 percent this week to 35.65 a dollar, Singapore’s dollar weakened 0.9 percent to S$1.5225 and the Philippine peso weakened 0.3 percent to 49.08. The Vietnamese dong was little changed at 16,978.50.

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